The lowdown on the city budget, Part 2: Possible solutions
At the March 19 city council meeting, City Manager Don Schwartz presented the council with a range of possible solutions to the city's budget deficit
The second half of the March 19 Sebastopol City Council meeting was taken up with a discussion of possible solutions to the city’s looming budget deficit. City Manager Don Schwartz gave a long PowerPoint presentation, exploring various ways to raise revenue and cut spending.
Schwartz began his presentation by briefly recapitulating the scope of the problem: $1.7 million deficit for this year, $2 million deficit for next year, and $2.9 million deficit in the years following. (See Part One of this article, which discusses these numbers in greater detail.)
Schwartz’s proposed approach for the evening was to provide recommendations to council. He can’t actually make budget decisions on his own; those are reserved for the council as a whole. What he was asking the council for that evening was their approval so that staff could research the various options more deeply.
“We don’t want to work on issues unless you’re interested, and we’re not looking for decisions on specific budget items,” he said.
The council agreed to take a straw vote on every slide, with thumbs up/thumbs down. (Public commenter Ernie Carpenter said this violated the Brown Act, but City Attorney Larry McLaughlin said it didn’t, as long as the council took an actual vote at the end after public comment.)
Laying out the general landscape, Schwartz said, “To some degree, we would expect small cities to have higher per capita costs because they're spreading some relatively fixed costs over a smaller base. But there are some things we can do.”
These included the following:
Look at the data [that is, the city’s budget data] more closely.
Be open to different models of service (such as fire consolidation).
Pursue ‘best value’ procurements; maybe ‘piggy-back’ on other cities.
Compare compensation with other cities.
Improving city revenues
Schwartz then proceeded to introduce a series of what he called “Top Tier” revenue options, including the following:
Pursue a sales tax measure for the November ballot. Calling the sales tax “the biggest single one” in terms of impact, Schwartz said. “We strongly suggest we take a look at that.”
Pursue one-time money from the county in the short-term. “I do think that we need to take advantage of opportunities and maybe push the envelope and create some for ourselves,” Schwartz said. “We know that they [the county] do have substantial amounts of fund balance, and it’s certainly easier for them to approve one-time monies as opposed to something on an ongoing basis.”
Continue investigating the enhanced infrastructure financing district (EIFD). (See the Sebastopol Times article on EIFDs here.)
Renegotiate the Sebastopol branch library lease with Sonoma County Library. “Basically our lease says the city pays for everything expensive, and the library pays for everything else. I think that’s just calling it as it is,” Schwartz said. “We carry a very large load of the maintenance costs…The library has substantial amounts of money with the Measure Y tax still in effect, and I firmly believe they could afford to do more than they've been doing to help us out.”
Review building fees. “The notion here is to ensure that our building fees fully recover the costs associated with what we do for inspections, etc. We have an item we're planning to bring to you soon. And I strongly recommend that you give this one a thumbs up.”
He followed this up with some second-tier or “pursue later” options, including:
Public broadcasting fee on cable bills.
Explore changes to formula business ordinance.
Selling city property.
Enforcing business license fees.
Cost recovery for planning, fire, etc.
Review leases on city-owned buildings.
Cutting costs and shifting the city’s image to ‘business-friendly’
Listed as “Potential Short-term Changes,” these suggestions included the following:
Eliminating staff support and city expenses for the Climate Action and Public Art committees, and redirecting staff time toward revenue-producing activities like EIFD, economic development and other ways to bring in new revenue.
He also suggested consolidating the planning commission and design review board, noting that this was a common model that could lead to streamlining and make it easier to attract businesses to Sebastopol.
Next Schwartz suggested eliminating business licensing for vendors at events like the farmers market and the Barlow’s outdoor market. Though this would cost about $8,000 a year in lost revenue, he thought it would be worth it to help build the city’s business-friendly reputation.
His most controversial ask of the evening was the suggestion that the city formally eliminate its Community Grants Program. These are the small grants that help support the city’s nonprofits. While the individual grants are small, in the past they’ve cumulatively added up to $50,000 to $75,000. The council hemmed and hawed on this one, eventually agreeing to suspend the program for two years.
Other short-term changes included shifting the remaining $1 million in assigned pension reserve to the city’s Section 115 Trust and, also, formally rescinding staff ability to waive fees up to $1,000.
Looking ahead to the preparation of the 2024-2025 budget
Schwartz set the tone by recommending—oh, shock to the system—a balanced budget.
“Basically I'm planning to recommend a balanced budget to you, where on-going revenue match on-going expenses,” he said. “At least that's my starting point going into this. And this would include $300,000 toward preserving our assets, whether it be streets or buildings, parks, etc., but trying to mitigate and stop the deterioration of those important community assets. Based on the model [presented earlier in the evening by Bob Leland], that means $2 million in revenue or reductions.”
In addition, he recommended that the council limit the use of one-time funds to one-time expenses.
Councilmember Zollman also requested that they look at what it would take to make $2.5 million in revenue or reductions, which Schwartz agreed to do.
“This may be the overachiever in me, but I believe we can do this. It will not be pretty. $2 million is not gonna be great either. It's gonna be another dose of ugliness,” Schwartz said.
He also said he would like to make these cuts and revenue enhancements in alignment with council goals and values. The problem is the last goal-setting was done in 2019 (in other words, by a previous council). Councilmember Maurer had complained earlier in the evening—as had Councilmember McLewis at a previous meeting—that in the absence of defined council goals and priorities, it was hard to move forward. Schwartz suggested, “We can do a very good sort of goal setting or prioritization conversation in the next council meeting.”
He also gave some indications that he wasn’t interested in slashing the city’s already lean administrative staff.
“At some point, reductions in key functions undermine the organization, and we may be near (or past) that point in some cases,” Schwartz said. He noted that reductions should be selective and people shouldn’t expect equal reductions across the board.
“I think we need to be more strategic,” he said.
He also asked the council to be open to shared services opportunities with other cities or districts, including fire consolidation, that perennial third rail of Sebastopol politics.
Schwartz also suggested the city should continue to use outside contractors in cases where city staff lacks the expertise or time to accomplish a given task.
He summed up this way:
“The way I'm thinking about this is, all options are on the table,” Schwartz said. “We're going to try to avoid layoffs, because not only is that painful for individuals and the organization, but it definitely reduces services. Budgeting is about choices and tradeoffs. It's hard. Choices and tradeoffs have hard impacts on people. I don't want to minimize that.”
“The criteria I use to evaluate options is what I think—what we think—is in the best interests, the long-term interests, of the residents of Sebastopol. But really, that's going to be your decision to make,” he said to the council. “We're going to take our best guess and come up with a budget that reflects that.”
Both Schwartz and consultant Bob Leland (see our coverage of his presentation in Part 1 of this article) won accolades from listeners.
“I think you've done a very comprehensive job of presenting the problem that Sebastopol has, and I think I hear solutions coming through this and I appreciate your diligence,” said Ernie Carpenter, though he went on to reiterate his objections to the straw vote method the council had used to get through the presentation.
Council watcher Oliver Dick seemed elated by the presentation. “Terrific. The two best presentations that I’ve seen in my many years of grinding through these council meetings,” he said. “I'm very pleased about the whole thing. I feel like we've got a foundational solid kind of base to work from…So congratulations to the city manager and the staff and the council.”
Not everyone was happy, of course. Kyle Falbo complained that the documentation that was on the website was substantially different from what was presented at the meeting, and both he and others complained about the lack of public comment time allowed for this very important issue.
As it was, the council raced to get through its official vote—going page by page through Schwartz’s PowerPoint and voting yes all over again—and finished up just in time to wrap things up by 11:30 pm, the Teen Annex’s official closing time.
Watch Schwartz’s presentation here. His presentation begins at time stamp 3:55:48.
Excellent reporting!
Unfortunately Zoom bombers made it very unpleasant to attend that meeting.