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UPDATED Council talks budget zzzzzzzzz

Submitted by on 1, February 9, 2009 – 8:00 am2 Comments

This past Saturday, the City Council held another of the marathon sessions it is becoming famous for (though this one, thankfully, was during daylight hours). We’ll call Saturday’s session Everything You Wanted to Know About Alameda’s Finances … well, no you didn’t. Who am I kidding?

Here’s the recap:

Reminder that the city is really, really not going bankrupt? Check. Blaming “the media” for the city’s big, fat PR problem? Check. Overly long discussion about a report that should have taken 20 minutes, a half hour, tops? Check. Heated discussion over general fund balances … internal service funds … OPEB … sorry, what was I talking about again?

(You know I kid because I love, right?)

Seriously though, there were a few newsworthyish items out of Saturday’s budget workshop, not the least of which was a discussion about how the city is going to pay its retiree health benefits, the cost of which would be around $75 million if the city had to cut the check today.

Interim Finance Director Ann Marie Gallant and City Manager Debra Kurita have hit on an ingenious-sounding solution to deal with the problem: Bond against the debt for a retiree benefit program the city is phasing out, invest the money and use the return to pay the city’s future retiree health bill.

Here’s the long version: The city has two public employee benefit plans, an old one that is used by a handful of former employees and their spouses and the plan that almost everyone else uses, through CalPERS. The city has been paying its annual expenses on that plan – expenses that increase by roughly $300,000 a year. So city officials have been looking for ways to cover those expenses.

That old plan is a fixed cost – a declining cost, actually. If the city continues to pay its current annual bill for that plan as the costs decline, it could use the additional money in the short term to cover increases in its CalPERS plan.

The anticipated total cost of the benefits to be paid out over the life of the old plan is around $23 million. So Gallant said the city could bond against that cost and invest the money, hopefully generating enough interest to cover its retiree health costs.

Still awake?

City council members said they like the idea, and they’re moving forward, vetting it through the courts (long story) and the city’s Fiscal Sustainability Committee, which is made up of local financial types.

More to come on that as it happens.

Other things I learned at the meeting: The city hasn’t been billing its departments properly for workers compensation, information technology expenses and a host of other shared services, putting the fund that manages those services about $2.7 million in the hole. They’re working on it, though.

And a representative from the Alameda County Labor Council dropped by early on to tell the council that it doesn’t want to see the city outsource any of its public services, which it could consider under a set of financial policies and guiding principals discussed Saturday.

City Manager Debra Kurita said the outsourcing option is included in the city’s toolbox for balancing its budget and could be considered in this and future years, but that no specific outsourcing plans are currently being discussed.

But Domenick Weaver, president of the local firefighters union, noted the council’s recent decision to outsource operation and maintenance of the Chuck Corica Golf Complex to a private firm, Kemper Sports. And he said the budget the city is building for next year could outsource two fire prevention staff.

To update you on that, Councilman Frank Matarrese just dropped me a note to say the council nixed the outsourcing idea from its set of fiscal policies, and he said the city has talked about moving the fire prevention folks to Planning & Building, not to an outside firm.

We’ll have more on this, we’re sure, when zzzzzzzz ….

2 Comments »

  • David Kirwin says:

    Michele,

    You must have had a long week to have snoozed thru the budget session, but please don't act like this is boring stuff – What could be more important for our city than the budget and how it is handled? Well, Truth and Justice are up there too, but you get my point. I too could not be at the entire meeting or even at all which I really wanted to see – I look forward to finding what I missed on the website. I guess I am just a bit disappointed that your "zzzzzzz" attitude seems to trivialize what is really so important to every citizen. We should be encouraging attendance to these shared events.

    Kudos to you for making a report though, we'll see how it compares to our local press reports this week

    Is there any reason you did not report on the fact that the city was over reporting the General Fund? If you missed it, …well even though you were at least part of the meeting, maybe you cold have said what part of the meeting you were reporting on, because I was there for a total of about 3 hours (10-10:30 & 2:30- end) and there was so much more you could have included in your report & I feel I missed some of the best stuff, and you didn't mention any of it. Maybe your report is based on only the last portion, trying to catch the “summary”.

  • Hey David,

    I did focus on the retiree health benefits bit because it seemed like the most important part of the meeting. The Council has talked about this being a huge issue because their "pay-as-you-go" approach doesn't help them deal with the escalation in costs they are facing, and city staff offered an interesting (and newsworthy) potential solution to that problem.

    I also sat in on the beginning of the meeting, where they approved their second quarter financial report (though they didn't get into how they'd deal with what seemed like the key issue there – the billing issues with their internal services funds – until much later).

    When you say the city is "over reporting" the General Fund – are you talking about the issue with the reserves related to the internal service fund, and the city basically saying they've got $2.7 million than they actually have? (Or did I miss something?)

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