“We will know at that time (July 1, 2015) whether the city can continue to deliver the services we have historically enjoyed, and we will also know if it can be done without Measure E,” he wrote me just before the City Council unanimously passed its 2012-13 fiscal year budget June 5.
Churchill called next fiscal year’s budget — which includes a $49.9 million general fund that needed $2.2 million in reserve money — an “incremental step,” part of a larger strategy to erase chronic deficits by 2016, when Measure E expires. It was enacted by voters in 2010.
The eight-step program includes using outside contractors for some services, improving technology, reducing the number of city departments (and therefore department heads) and shrinking the workforce through early retirements. According to Finance Director Zane Johnston, Tracy eliminated the equivalent of 90 full-time positions even before those steps were rolled out.
The plan also counts on the economy to shake out of its stupor.
While the expense side of the equation can be controlled by the city to a great extent, there’s much less the city can do when it comes to revenue.
Johnston has said economic development — building up the Northeast Industrial Area and future projects at the Cordes Ranch and Gateway sites — is “one of the things I know can help this community” in terms of raising tax receipts.
But that effort, which appears to be sincere and robust, isn’t all it will take to right the revenue picture.
Churchill knows the city can’t square the budget circle without boosted sales tax receipts and a stop to a half-decade decline in property tax rolls.
“The financial strategy hinges a great deal on revenue growth the next four years,” Churchill said.
Jeffrey Michael, director of the University of the Pacific Business Forecasting Center, believes the Central Valley is on the rebound from the Great Recession.
“We’ve definitely, I think, turned the corner,” he said.
Though our region has so far lagged other areas of the state, Michael said the unemployment rate is dropping and workers are being added to payrolls.
Though he called the situation “still terrible,” he said there’s reason for optimism.
“It’s something I think we can sustain,” Michael said, “even despite the worries that are out there about the broader economic recovery at this point.”
The property tax outlook, however, lacks even that pale rose tint.
San Joaquin County Assessor Kenneth Blakemore has predicted another year of declining revenue. And no one knows when property values will gain ground again.
Indeed, counting on revenue growth in this economy is a big bet by the city. And it’s not Tracy’s only gamble when it comes to the budget-balancing game.
The eight-step plan predicts saving $3 million or so from new labor union contracts.
The current accords, Churchill said, expire July 1, 2015. They tie the city to some expenses it cannot control, such as increases in what must be paid to the California Public Employees Retirement System.
The results of those contract negotiations will have a lot to say, Churchill added, about whether the city ends its days of deficits.
Any red ink not blotted up will force the city to make a choice once Measure E lapses: Live without the increased revenue and chop services, or ask voters to extend the tax in some form.
Though mentioned only in passing — and even then only in guarded tones — it’s clear a discussion is brewing about renewing Measure E, and groundwork is being laid for a campaign on its behalf several years down the road.
If the budget isn’t balanced by the time Measure E expires, Churchill said, there would be few efficiency gains left to make. Cuts at that point, he said, “would seriously alter the quality of life in the community.”
As a second option, “… the renewal of Measure E would deserve consideration,” he added.
In statements to the City Council, Churchill, Johnston and other staff members have unflinchingly committed to closing Tracy’s chronic budget gap in hopes the Measure E conversation never gets beyond this early speculation.
Which well they should.
Since its passage, elected and appointed leaders repeatedly said their goal was to not need Measure E past 2016.
About 58.3 percent of the voters, apparently committed to maintaining public safety and other essential services, trusted the pronouncement and taxed themselves.
Given those promises and that trust, a second round might be a tough sell, even if the city does all it can to make Measure E a one-shot deal.
• Second Thoughts is a personal opinion column by Editor Jon Mendelson. Share your thoughts at email@example.com.