MODESTO — The Modesto City Council finally will discuss which is the path to fiscal health: asking voters to pay more taxes, cutting more from the city budget, or perhaps a combination of the two.
Council members agreed Tuesday night to talk at their June 25 meeting about more budget cuts and putting a sales tax increase on the November ballot. Mayor Garrad Marsh had hoped to hold the discussion sooner, but June 25 was the only meeting all council members could attend.
Council members met Tuesday to give their first approval of Marsh's proposed $344 million operating budget for the 2013-14 fiscal year, which starts July 1. The vote was 5-2, with Stephanie Burnside and Dave Cogdill Jr. casting the "no" votes.
The second vote is expected at the June 25 council meeting.
Burnside and Cogdill wanted a budget with more options regarding spending cuts. Burnside said that while the city had made significant cuts several years ago when revenues plummeted in the recession, the city has not made additional ones to bring expenses in line with revenues.
The $344 million operating budget consists primarily of water and waste-water funds and the general fund. The water and waste-water funds are in good shape. That's not true for the general fund, of which 72 percent is spent on public safety. General fund expenses are projected to be $11.8 million more than its projected revenues of $104.6 million.
Marsh proposes closing the gap by using $6.4 million in general fund reserves, $3.5 million in savings from not fully funding various city funds, such as the workers compensation fund, and $1.9 million in budget cuts.
But he warned that the city cannot continue to tap into reserves and borrow against accounts by not fully funding them.
He said Modesto had about $70 million in reserves in various accounts about five years ago but has been drawing them down by $9 million to $10 million annually to balance its budget.
He said the city won't be able to tap into those funds next year and will face deep budget cuts, such as the elimination of entire programs, without an additional revenue source.
During his February State of the City address, Marsh raised the idea of a temporary public safety tax. And last week, the council was presented with the results of a city consultant's May phone survey of 400 residents, which showed strong support for a half-cent public safety sales tax or a 1 cent general purpose sales tax.
The consultant recommended that if the council decides to put a tax increase on the November ballot, it pursue the 1 cent general tax. Sixty percent of the survey respondents supported a general tax, which requires a simple majority to pass. Seventy-one percent supported a half-cent public safety tax, which requires two-thirds approval to pass.
City Manager Greg Nyhoff said after the meeting that a 1 cent tax increase could bring in roughly $26 million annually. The general fund has lost about $22 million in revenue since 2008.
Burnside reiterated her frustration that during the Finance Committee's May budget workshops, she and the other committee members were not presented with options of cutting the budget by 3 percent, 5 percent or 7 percent, as they had in past years.
Cogdill has favored pursuing economic development to expand the city's tax base and increase its revenues.
Marsh presented a budget with 3 percent reductions and 3 percent increases among the city's departments. He said he was optimistic based on some promising preliminary information when he started preparing the budget, but lost that feeling as he delved deeper into the numbers.
"I thought things were not so bad any longer," he said. But "my rosy world disappeared."
Marsh expects the budget cuts the council will consider June 25 will be in the range of 5 percent, 10 percent and 15 percent.
It takes four of the seven council votes to put a tax measure on the ballot. The council has until Aug. 9 to get a tax measure to the county election office to have it appear on the November ballot.
Bee staff writer Kevin Valine can be reached at firstname.lastname@example.org or (209) 578-2316.
MODESTO CITY COUNCIL WATCH
The Modesto City Council on Tuesday:
Listened to Lincoln Ellis introduce himself as the first chief professional officer for the new Boys & Girls Club of Stanislaus County.
Presented a proclamation to the Society for Handicapped Children and Adults, proclaiming June as Disabilities Awareness Month.