How are our finances headed in a positive direction now?
After the fiscally reckless budgets of 2013-14 and 2014-15, Moodys downgraded Richmond’s bond rating to junk bond status. The consequence of the downgrade (over $10M), combined with sustained pressure from me, you – our residents, and the media, finally resulted in the 2016 budget being our first structurally balanced budget in many years. And even though we still don’t pay our Annual Required Contribution for retiree health care, we are on a better financial path. This is why the East Bay Times gave me a glowing endorsement, and why Council Member Nat Bates endorsed me.
What does our broader financial picture look like?
In the big picture, the three key aspects to having sound finances are:
- Prudent personnel management Since close to 80% of our expenses are salary and benefits, we can’t control our expenses without prudent personnel management. We are already locked into very generous retirement benefits for all our unions. However, we can get the employees to pick up a larger share of the cost of their benefits. We have secured concessions from Fire and mid-management unions to share these costs, and are optimistic that other unions will do their part We have also secured agreements from all unions on salary freezes. In addition, we are reducing the work force where we reasonably can by eliminating vacant positions.
- Revenue / Taxes New taxes can raise a lot of money very quickly. However, our taxes are already some of the highest in the area. And because our city needs a lot of services, people may not always feel satisfied with the level of services. Also, when city council makes promises it can’t keep, residents lose faith in the management of the city. At this time, raising revenue through taxes isn’t a viable option.
- Attracting Businesses and development We need to do everything we can to attract businesses because they provide revenue and jobs. The Hilltop mall will soon have a mixed-use development, which will contribute to the city’s revenue base. We have reached a point in our business cycle where market rate developments that can generate substantial property taxes and attract retail businesses, have become viable in downtown and on the South side.
However, please beware of politicians who promise to grow our way out of our financial problems. It can’t happen. Most businesses don’t contribute much in property taxes; their main contribution Is jobs. Retail businesses also generate sales taxes, but you need sales of around $8M per year to support one police officer. Similarly, even a large high-end residential project like the $200M+ Terminal 1 development will only contribute enough property taxes to support 3 police officers.
Thus, on two out of the three key factors, namely, prudent personnel management and attracting businesses, we are on the right track. We need council members who understand and accept the city finances, to make sure that we continue on this path.