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Submitted by on 1, March 30, 2011 – 12:02 am35 Comments

Alameda is facing multi-million-dollar budget deficits over the next five years that could bankrupt the city if major changes aren’t made now, the city’s top elected finance officers said Tuesday.

“Based on where they are now, in a little over two years, you’re out of money,” City Treasurer Kevin Kennedy told a reporter after an impassioned appeal to the City Council to quickly address the city’s money problems that liberally cited bankrupt Vallejo as a cautionary tale.

The City Council may consider slashing staff and programs, cutting pay and increasing city employees’ retirement and health care costs in order to bring the city’s spending in line with the money it’s taking in, city officials said after offering a grim budget forecast to the council on Tuesday night. Alameda is facing a $6.2 million general fund budget shortfall next year and growing deficits for each of the four years that follow it; without major cuts or more money, the city will exhaust its fund balance before the end of the 2013-2014 fiscal year, the forecast showed.

“The day of reckoning is here,” City Councilman Doug deHaan said after top city staffers told the council their store of one-time budget-fixing tricks has run out. Acting City Manager Lisa Goldman said major structural fixes are needed and asked the council for direction on the solutions city staff should pursue.

Council members first offered stunned silence and then little more, saying only that they want core services protected and that they want community guidance on what those are. But Kennedy and City Auditor Kevin Kearney said the council knew the big budget problems were coming and that they need to act quickly to keep the city solvent.

They said the council needs to cap growing employee benefit costs. If the council doesn’t act, the city may find itself forced to slash staff and unable to pay the benefits it promised to employees, the pair said.

“If we don’t decide, a court will decide,” Kennedy said. “It will be a bankruptcy attorney and bankruptcy court.”

Mayor Marie Gilmore said she agreed pension reform is necessary, but said it won’t solve the city’s current fiscal problems. Kennedy and Kearney said the fixes still need to happen to keep the city solvent, and they said they want city leaders to consider cutting salaries instead of laying off staff. They said the city should also consider asking employees to share increases in pension and health care costs, something Goldman said the city’s management employees are willing to do.

Employee retirement and health care costs alone are expected to grow by $2.8 million in 2011-2012, with more than $1.3 million of that going toward increased retirement benefit costs for public safety employees. The city’s retirement plan contributions for public safety employees are expected to grow from 31 cents on the dollar this year to 45 cents in 2015, and from 13 cents for the rest of the city’s employees this year to 19 cents in 2015.

The city is also facing an $860,000 payment to Alameda County for emergency medical services next year, and city staffers are anticipating additional fuel and other supply costs of $622,000. Meanwhile, Controller Fred Marsh said the city is expecting to lose $710,000 in sales tax revenues on a continued weak economy and roughly $900,000 through the handover of its golf complex and ferry services and the anticipated dissolution of its redevelopment agency, which pays for other city services it uses.

Council members asked about opportunities to increase the city’s revenues; Kearney said the city would be hard-pressed to raise enough money to fix the budget. City officials offered a bevy of suggestions for increasing existing taxes or creating new ones, like a parcel tax for public safety services or admission tax on theater tickets. The city will also study its existing fees for possible increases.

The forecast doesn’t include pay increases or new employees. Nor does it factor in the cost of deferred maintenance on city parks and other properties or of saving toward future retiree benefit obligations.

“What we should have been doing was dealing with that when we were in a better financial position. But we’re not there now,” Goldman said.

Goldman said she has asked the city’s department heads to prepare budgets for next year showing 5 percent and 10 percent reductions. Top city staffers will begin vetting those in April for a council budget workshop in May.


  • Al Wright says:

    “Council members first offered stunned silence and then little more, saying only that they want core services protected and that they want community guidance on what those are.”

    Hello? This is a shock to the Council? What rock have they been sleeping under? Kearney and Kennedy have beeen telling us this for a couple of years now. Bonta is the only one of the 5 to have an excuse-he hasn’t been sitting at the dias for the past 4 or so years, and can plead ignorance. And they want community guidance now? Weren’t they elected to lead? Well lead, dammit. Anybody can ask for a vote. Make the tough decisions you were elected to make. What’s wrong with our elected officials these days? Where is the vision? Where is the critical thinking? Where are the cojones? If you won’t or can’t do your job, step aside, now, before it’s too late to save our city.

    • Marshall Cromer says:

      Johnson, Tam, Gilmore, deHaan are all backed by the Public Employee unions. They dare not go after the unfunded pension of $74,000,000 and Unfunded Health Benefits of $76,000,000. There is nothing wrong with our officials they simply are looking out for the people that put them there. They cajones are to increase taxes and fees to appease the public employee unions that have collectively bargained against us tax payer citizens that is leading us to bankruptcy. Until we replace these people with some people with cajones to fight the public servants we have no hope except chapter 9.

  • dave says:


    Council members first offered stunned silence and then little more, saying only that they want core services protected and that they want community guidance on what those are.

  • Richard Bangert says:

    “Council members…want community guidance”

    The community wants council leadership.

    The treasurer and auditor have given the council the guidance they need: “Kennedy and Kearney said the fixes [pension reform] still need to happen to keep the city solvent, and they said they want city leaders to consider cutting salaries instead of laying off staff. They said the city should also consider asking employees to share increases in pension and health care costs, something Goldman said the city’s management employees are willing to do.”

    The only thing I would add is to show us a simple graph in which the two lines (expenses and income) start to become parallel, in other words fiscally sustainable instead of kicking the can down the road.

  • Ben says:

    Where can one get a copy of the projected budget (preferably excel) for the next few years? Is that possible? Being a planner myself (unfeeling critical thinker) I have to wonder how hard it would really be to find that money. I’m also interested to look through the services as a % to the total budget, and decide for myself what’s important and communicate that to the council as a concerned resident.

  • Adam Gillitt says:

    The budget projection doesn’t even factor in costs of known litigation either. And, despite the urgency of the problem, the Mayor provided no direction to staff.

    This meeting was amazing in the amount of emotion displayed by Kevin Kennedy and Kevin Kearney, and in the lack of preparation shown by our esteemed Mayor to handle the long-existing problem.

    New Mayor Gilmore’s sweetly inviting members of the public to participate and provide feedback at the end of the Council meeting on an issue that should have been underway months ago is an insult to the community and the concept of elected leadership, community participation and transparency.

    Where was the transparency and community participation when she, her cohorts and benefactors railroaded a financially responsible City Manager out the door to replace her with an unqualified political ally of Don Perata with no financial management experience?

    Four big egos with higher office aspirations battling it out in City Hall isn’t going to allow for fine attention to details, much less solving big issues.

    I’m not looking forward to seeing Kevin Kennedy walking around City Hall in two years with the keys turning off the lights and locking up as he suggested, but he is pretty clear about what needs to be done if we don’t want to become the next Vallejo.

  • Carole says:

    If the City finances are in such dire straits, why did the Interim City Manager spend money on ‘rebranding study ($75K), reorgnization studies ($75k), witchhunts ($100k)’ and expose the city to such significant legal risks? Was it at the direction of Mayor Beverly Johnson, since this problem has been “known” for over 2 years?

  • Karen Bey says:

    I supported Ann Marie Gallant because I thought she had a viable plan to turn our finances around, and her plan was being implemented. What happened? Where is the plan she created to save us from bankruptcy and why wasn’t it implemented during her reign as ICM?

    Some of her supporters are still trying to sell her as a financially responsible City Manager – but the fact is she left the City on the brink of bankruptcy.

    • Richard Bangert says:

      “Where is the plan she created to save us from bankruptcy and why wasn’t it implemented during her reign as ICM?”

      Something WAS implemented – that’s why the reserve fund rose. But the biggest financial burden, public safety pensions and benefits, is not something she had the unilateral power to order changed. We’re headed toward bankruptcy because of numerous reasons cited by others concerning CALPERS obligations.

      The CALPERS obligations are growing faster than we can keep up – something needs to change.

  • Barbara says:

    Adam Gillitt,
    it is time for you to get ready, and run for City Council. Instead of waiting for a disaster we need to get new, smart blood into our City’s Chamber. This failed leadership will not get any better…

  • Karen Bey says:

    Carole – you bring up some very good points. I watched a couple of her budget presentations to the council, and based on her presentations I thought she had everything under control.

    Here’s a comment Beverly Johnson made about her opposition to the action made by the council not to renew Gallant’s contract:
    “It’s in large part because of Ann Marie that the city is in stable financial condition,” said Johnson. “I think Ann Marie did a very good job, and I hope they’re able to find someone who can do as good a job managing the organization and keeping the city financially sound.”

    So how is it that the city was in stable financial condition just 3 months ago and now be on the brink of bankruptcy?

  • Denise Lai says:

    The Kevins said decisions need to be made “tomorrow” and “yesterday”…this cannot wait! And yet the Mayor and city management stay on the same track, showing absolutely no urgency. As your last sentence says, they will think about it some more in April. How do you define insanity? Doing the same thing over and over again and expecting different results.

  • barbara kahn says:

    the council that took no action was led by Beverly Johnson, Frank Mattaaresse and Doug DeHaan and went unquestioningly along with the icm. who had pretty much sidelined Marie and Lena , I am sure that this council will move forward selectively to deal with this critical issue. We are lucky to have this kind of intelligence tackling this problem

    • Betty says:

      Just wanted to double check that you referring to Alameda?
      “We are lucky to have this kind of intelligence tackling this problem”

      • Barbara says:

        I wonder if Barbara Kahn talks about the intelligence of room temperature; the intelligence that placed us in this mess in the first place. The intelligence which appears to sell Alameda to the highest contributor? Please check the contribution page for Bonta and Tam, and you’ll see Mr. Russo there. The true intelligence should see the conflict of interest and ethics issue. Phony intelligence will find million reasons to justify it. Time is the best judge, and will see how this choice will play out.

        Thus far, I see only more taxes as a solution. Is this an intelligent solution or just lazy one? Everyone will have to answer to this question when the bill will show up. For now, hold on to your wallet, the intelligence is ready to get your money. Work harder, City Hall depends on you…

  • Gretchen Lipow says:

    There has been an interesting scenario going on in the past few months that goes like this; fire the firechief, fire the city manager – and that will solve all the problems of the city. Well the problem is the problem and not the people, and now council is staring at the real problem. Who can they blame now? Only themselves if they can’t overcome their paralysis. Get the job done if you don’t want to be the second city in the area to go bankrupt. You all wanted to be in charge now show us some leadership. By the way,hiring a new city manager with no city managerial experience, in this economic climate, does not breed confidence.
    Over two years ago many of us in the community sounded the alarm over the financial health of this city. Was the council listening?
    It’s time to listen and act now.

  • Jakstem K says:

    Noooo … not another parcel tax! Time to cut the unsustainable benefits first.

  • Former Island Resident says:

    Options for revenue include

    1) Alameda Municpal Power, AP&T or Bureau of Electricity (whatever the name is now) should start raising electricity rates.
    2) Toll for use of the first 50ft of street after a bridge or tube.

  • dlm says:

    Here’s what Kevin Kennedy had to say about Ann Marie Gallant:
    “Officially Speaking: Kevin Kennedy responds
    Question 5 — Walter_Bailey asks: Describe AM Gallant’s influence on city’s fiscal health. Positive or negative? Most importantly, how & why?

    Answer: I want to address the question of Interim City Manager Ann-Marie Gallant’s influence on the City’s fiscal health. Fiscal health is what makes everything the City does possible. We can debate all we want about what color to paint the living room and what appliances to put in the kitchen, but if we can’t pay the mortgage it doesn’t matter much.

    Politicians will probably not be the source of fiscal discipline (see question #3 above). I hope I’m wrong about this, I’d like to be wrong about this, but time will tell.

    If we have a chance of preserving the City we love, we need a strong City manager, someone who isn’t afraid to stand up and make the tough calls that don’t win popularity contests but keep the City solvent.

    Our prior City Manager wasn’t this type of person, and we burned through nearly all of our reserves due to inaction in adjusting to economic reality. Gallant has worked diligently and effectively in beginning the process of getting the City on a sustainable path: cutting personnel, consolidating departments, streamlining delivery of services. I get the feeling she doesn’t mind putting her moral duty above making friends, and that’s fine with me.

    We need the City Manager to do what’s right, they are the CEO of the organization and sometimes the decisions need to be difficult.

    If the reward for doing what you know needs to be done is to be replaced, that sends one heck of a bad message to future City Managers.”

    Read more: http://www.sfgate.com/cgi-bin/blogs/inalameda/detail?entry_id=77836#ixzz1I9FvLcNh
    I don’t think it’s the nasty-gram mentality that bothers me in some of the earlier comments here so much as the bald-faced lies. Either way, petty bickering is not going to help solve the city’s financial worries.

  • Stephen says:

    Mr. Kennedy seems to speaking out of both orifices. If “Gallant has worked diligently and effectively in beginning the process of getting the City on a sustainable path: cutting personnel, consolidating departments, streamlining delivery of services” why does he say we are now on the brink of bankruptcy? Gallant is still collecting her $289K salary and suing for more.

    • Kevin Kennedy says:

      Glad to see a spirited discussion of this important topic. As some comments I’ve made in the past have been brought up, I felt I should respond and clarify them:
      1. I do believe our former City Manager did a good job on fiscal matters. Staff reductions, consolidating City Hall West, overhauling the Planning Dept to better reflect the diminished construction environment, rebuilding reserves from dangerously low levels to generally average levels. It is a start, had that not een done we’d be in worse shape right now without question. But the fundamental, structural problems like the pension system and retiree healthcare are the biggest issues, and those remain unchanged. I’m not sure if it was as much from a lack of effort as it may have been from a lack of political will, but I guess we’ll find out now that we’ve got new folks in these positions.
      2. Not to get into semantics, but “verge of bankruptcy” implies a short timeframe (verge: edge, brink). In the situations I’ve seen in the corporate world, as an organization moves closer to insolvency, everyone “smells blood in the water” and the process accelerates–vendors stop doing business with you, employees panic, customers go elsewhere. So implying that we were on the verge of bankruptcy has many potential negative ramifications. That said, here we are two years later and our policymakers (Council) haven’t done anything to address those core issues in #1 above. I don’t know what time frame “verge” is for you, but if it’s 24-36 months feel free to whip that material out now. I’m a logical person by nature, and I had hoped this situation was so clearly unsustainable that it would be addressed, but here we are…

      • Barbara says:

        Hmm…Unions? Contract? Pensions? Who will be negotiating the contract? Democratic trio was endorsed and promoted by Unions. I guess they successful elected their own bosses…

      • John says:

        Kevin and Kevin

        If we know that all these City and AUSD Employee Salary’s , Benefits and retirement pensions are bankrupting city and unsustainable for the city to pay and are NOT based on a sound actuarial principles , why has Council done nothing about it last XX amount of years?

        We have deprived our students of the basic needs in the classrooms and programs and activities and watched our assets turn to rubble due to deferring maintance last XX years.

        Cutting salary’s and benefits 5 -10% is a joke to where we stand financially or am I missing something?

        Here is what City Charter States:

        Establish on or before July 1, 1938, a retirement, pension and insurance system for City officers and employees based on sound actuarial principles, which system once adopted shall not be amended except by majority vote of the full Council and shall not be repealed except by the People. Such system shall provide for the support thereof by deductions from the compensation of officers and employees of the City and contributions from City funds and funds under the control of the respective boards.

  • Richard Bangert says:

    “I respect the energy David Howard and his group put into examining these issues, but ‘verge of bankruptcy’ is pretty strong language,” [Treasurer Kevin] Kennedy said. (Alameda Sun, January 29, 2009)

    “If we don’t decide, a court will decide,” Kennedy said. “It will be a bankruptcy attorney and bankruptcy court.” (The Island, March 30, 2011)

  • Barbara says:

    I respect and admire David’s Howard effort to save Alameda from itself. He has a vision and is always ahead of curve, he sees what is coming and gets all the heat for it. Once again HE WAS RIGHT. Thank you, David Howard for your effort, vision and leadership.

  • Jake says:

    I have never seen so many so called “educated” people so bad when it comes to money, this applies to not only the poor leadership in the city of Alameda but the mortgage/financial crisis in general. What are they teaching these people in college? They brag about how educated they are when campaigning for these positions yet can’t even see that the city is spending more than it is taking in. Alameda, I am glad I left you because I saw what you were becoming, a tax and spend liberal oriented bottomless pit that can’t support itself or its broken school system without sucking its citizens dry. You can’t keep babying all these employees and administrators with all these high salaries, benefits and wonderful opportunities at the expense of tax payers. They need to get all service salaries down from police, fire, management, everywhere. If they don’t like it, quit. Maybe the financial bleeding will stop and so will the fire trucks parking at your shopping centers on the tax payers dime.

  • Betty says:

    I think Alameda is in the same situation as other communities. OUr government keeps on putting band aids upon band aids. AUSD does the same thing. Instead of closing schools that are in the red put another band aid on it and scare the citizens to vote for more money. Now it’s going to be the police and fireman…we need more money.
    Well guys I think the time has come for government employees to realize that us peons that pay your salaries just can’t do it anymore.
    No more band aids.

  • Karen Bey says:


    Mayor Gilmore sets the record straight in a recent article on Alameda Patch. It’s a good article; I think everyone should read it. I’m glad she does because frankly we’re hearing two different messages from you: one message that says the ICM did a good job on fiscal matters, and the other message is that the fundamental problem — the pension system and health care benefit budget issues were never addressed.

    The mayor further explains that during the last two years, both she and Councilwoman Tam asked Ann Marie Gallant to move forward in negotiations with police and fire, but their requests were ignored. I watched most of her budget sessions and since she was spending money on consultants, studies, and branding efforts, etc. I assumed she had the budget issues under control. I don’t understand why she never tackled the fundamental issues with the budget; she had 4+ years to do so.

    Marie concludes by explaining that “Alameda is Solvent”. Like the state and many cities in California, we’re all facing similar budget problems with pensions and health care benefits. And like every city is doing, the Mayor says Alameda is set to make the tough decisions necessary to move the city forward.

  • Carole says:

    Have anyone discussed cutting the subsidies to the museum, PSBA, WABA, GABA, the Chamber of Commerce, the 4th of July Parade? Are these all ‘nice to haves?’

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