As the end of June looms closer, the Menlo Park City Council debated late into Tuesday night over what city costs to cut in order to create a balanced budget by July 1, the start of the next fiscal year.
The COVID-19 pandemic has created about an $8 million shortfall this fiscal year and is anticipated to generate a shortfall of $12.7 million in the upcoming fiscal year.
The council has some funds saved up for difficult financial times, and staff advised spending up to $4 million of that one-time money to get through the pandemic's impacts over the next year. That left about $8.7 for the council to figure out how to cut.
The council agreed Tuesday to a series of budget cuts. First, a set of reductions by department aimed at saving a little under $800,000. It also agreed to reductions offered by the city's unrepresented management group to reduce personnel costs by 25%, including freezing two positions, suspending pay increases and bonuses and other steps to save $1.14 million.
Next, it opted to save another $3.7 million by adopting another list of cuts, identified by staff as being fairly low-impact to the community. Those included measures like cutting some vacant positions, halting free Caltrain passes for city employees, stopping the city's holiday decoration and lighting program, delaying vehicle purchases and reducing temporary staff by 30%.
Up for consideration to be cut were an estimated $144,000 measure to expand access to police data and a $272,000 estimated cost to eliminate oversight of contract custodial services during the night shift, which the council opted to keep for now instead of cut. "Anything related to cleaning services I don't want to eliminate," said Mayor Cecilia Taylor.
The council discussed in depth and agreed to a number of proposed cost-saving measures to library services, such as withdrawing from the Peninsula Library System, reducing library hours by 25% at the main and Belle Haven branch libraries, and reducing the book and e-resource budget up to 75%.
Membership in the Peninsula Library System has increased by 17% in four years, said Sean Reinhart, library director. "It's gotten to the point where the value proposition isn't the same as it was in the '80s when it was formed." Libraries are switching to "fulfillment" models from "repository" models, in which people identify what they want and look to the library to provide it, rather than browsing through lots of books on shelves, which can be more efficient and cost-effective. The Friends of the Menlo Park Library nonprofit was expected to step in to provide support to help make up for some of the planned cuts to pay for library materials, he added.
And while the council agreed to a few extra cuts – including the big-ticket elimination of the police department's traffic unit, set to save $800,000 – they were split on many other items. Additional cuts included daytime parking enforcement, community engagement by the police department, sign replacements, additional IT support, some public works permit review capacity. Together, those cuts were anticipated to result in the layoffs of four full-time employees and 41 temporary employees and freezes of 14 positions, according to staff. The city's labor unions require 45 days' notice before layoffs can take place, so city savings from those layoffs are still some time away from taking effect, staff said. They expected to start providing those notices to affected employees starting May 27.
The council agreed to meet for another discussion sometime before City Manager Starla Jerome Robinson is scheduled to release her proposed budget for the council to review on June 9. Councilman Ray Mueller said he wanted the council to consult with an economic expert to provide input on the budget before finalizing it. When that meeting would happen is still to be determined, because the council was tentatively scheduled to discuss the topic of on-street dining on Santa Cruz Avenue with the Chamber of Commerce at its next meeting, June 2.
Because there is so much uncertainty about the future of the economy locally, Jerome Robinson said she planned to put together an initial 90-day budget to start. After that, the budget could be reviewed quarterly at the start of October, January and April over the coming year for potential updates based on the economy, explained Finance Manager Dan Jacobson.
A couple of the most controversial budget cut considerations were postponed to a later date: whether to retain the city's two child care centers, which are heavily subsidized by the city, and what to do about the city's gymnastics center, which has broken even or operated at a surplus up until now. With the COVID-19 pandemic, however, the gymnastics center hasn't been in operation, and staff members haven't been furloughed or laid off.
Looking ahead to the future, it's not certain when or if children's gymnastics will be back any time soon – because gymnastics has usually involved groups of children frequently touching equipment, the activity is considered a higher-risk one for the virus to spread. Even if the gymnastics center were to reopen, it's not clear whether the demand would be sufficient for the program to be as financially successful as it has in the past, and it would probably have a lower capacity, staff said. A pessimistic financial projection, in which the gymnastics center couldn't open until Jan. 1, 2021, indicates a net loss to the city of about $759,000. Councilwoman Catherine Carlton said she'd favor transitioning the program to operation by a third party, and the council agreed to furlough the program – and the 26 temporary workers involved in it – until it's a bit clearer what its future could look like.
The council also has some options for additional revenue and one-time money. There's an economic stabilization reserve of about $11.6 million, and about $2.32 million in unassigned money that's part of the city's general fund. It could also postpone capital improvements to save about $3 million or sell a property it recently bought at 1283 Willow Road, expected to generate about $3.6 million. Or the council could opt to increase its utility users' tax, to generate about $1.9 million, or consider raising other taxes, like the city's business license tax to generate about $1 million, or its transient occupancy tax, also known as a hotel tax. Both of those steps would require voter approval, however, and it's not clear how much an increase in hotel taxes would generate if few people are staying in hotels for the duration of the pandemic.