Image of City Manager Joe Lopez

City Manager's Blog

Jun 30

Adopting a Budget for the 2020-2021 Fiscal Year

Posted on June 30, 2020 at 8:59 AM by Thomas Reeves

Each year at about this time, your City leadership team works hard to craft a citywide budget that reflects an optimism that our employees will have the resources required to provide essential services, and also a bit of realism that balancing revenues and expenses has become harder and harder.  This year is certainly no exception given how much our world has changed in 2020.

In the midst of a global pandemic that has hit our local economy hard, the team has worked together to prepare a conservative budget in the midst of uncertainty.  Never before have we embarked on a new fiscal year with so much uncertainty about the health of our economy and the tax revenue to support the services we provide to the community.  The pandemic has triggered several potential new funding sources from the State and Federal Government for this coming year, but the amount, timing, and sustainability of such is unknown.  We remain hopeful that additional funds will be allocated, but there is no guarantee.

We cannot continue with “Business as usual” with our historical allocation of resources given the current stream of tax revenues.  Although our full-time employee count has remained steady at around 1,225 for the past five years, our employee-related expenses has grown considerably.  Quite simply, this City’s expenses have outpaced its revenues, and we need to make considerable progress in creating a more sustainable budget for the future.   

In pursuit of this goal, every department and labor group has been requested to make concessions, and there will be impacts to public safety and quality of life services, including our recreation program, streets program, and parks maintenance.  Our employees will be asked to make changes to the way in which they provide essential services to our constituents, and they will be asked to help redefine our operations according to the most pressing priorities.  Make no mistake, our residents, businesses, and visitors may notice a reduction in the services we’re able to offer, though I’m confident our resilient City will adapt, innovate, and even excel in the extraordinary times in which we find ourselves.

We’ve also been forced to make difficult reductions in our current and planned staffing levels. Unfortunately, our current workforce will be reduced by several filled positions, and those individuals have been informed of these decisions.  Additionally, 73 currently vacant positions have been eliminated and will not be filled.  We worked closely with our labor partners in identifying concessions – including furloughs – to mitigate additional position reductions. I sincerely appreciate the willingness of most of our labor partners who came to the table for those discussions, and the understanding members showed in doing what is best for the organization.
    
The process of delivering these actions has been gut-wrenching.  I fully recognize these actions directly affect lives and workloads, and I am calling on our entire team to move forward with sensitivity and support of one another.  Even as we work within our new financial restraints, I am committed to supporting our employees with as much of the resources as we have available to their work and development.  

One thing is clear: we will not be the same City at the end of the year as when we started, though I believe we’ll be a better City than ever before.  However, we will weather this storm if we work together and remain customer-focused, innovative, and accountable to our community.

Joe
May 28

The State Can Help Ease Local COVID-19 Budget Challenges. But will it?

Posted on May 28, 2020 at 4:46 PM by Thomas Reeves

It's no secret the City of Modesto's budget has been impacted greatly by the COVID-19 pandemic, and the Governor's budget for Fiscal Year 2020/2021 does not go deep enough in assisting California cities of our size.  Below is an excerpt from a letter I've written to our state legislators asking for advocacy on our behalf.

As you may know, during the Senate Budget and Fiscal Review Subcommittee No. 4, the Governor’s Administration clarified that the $450 million of CARES funds dedicated to cities will be split with $225M going to seven cities with populations between 300,000 and 500,000 and the other $225M for cities with populations under 300,000. This puts Modesto five cities away from funding (as the 18th largest city in the State of California), and based on our calculation Modesto would only receive approximately $2.2M for COVID-19 expenses. 

This funding formula provides seven communities with a total population of approximately 2.6M the same amount of funding as 469 smaller cities with a population of 22.1M. When viewed on a person by person basis, cities with populations above 300,000 will receive funding equal to $85.59 per resident, while the other 469 cities will receive funding equivalent to $10.18 per resident.  We implore you to work with the Governor and your colleagues in the Legislature to revisit this formula and recommend a more equitable solution. 

Specifically, we would recommend that you consider the below revisions, either separately or as a combination of the two:
  • More equitable split of funds between cities – As noted above, half of the $450 million of Coronavirus Relief Fund (CRF) is proposed to go to communities that represent 10.5% of the California residents eligible to receive funding, while the other half of funding goes to communities representing 89.5% of eligible residents. As an example that further demonstrates the disparity, under the current formula, the City of Modesto would receive $26.9 million less than the City of Stockton, despite only having 97,000 fewer residents. We would recommend a split of the funding that would provide more equal funding to all California cities.  For these reasons,  the City proposes an equal distribution of funds by population, which would result in smaller cities receiving critical financial relief.  
  • Increase overall level of funding provided to cities – The May Revise proposal for distribution of Coronavirus Relief Funds provides $450 million to cities and $1.3 billion to counties.  Additionally, the proposal does not provide any funding for cities that received direct allocations of CRF funding from the federal government; however, the May Revise proposal provides approximately $644.5 million in funding to counties that have already received direct allocations of CRF funding from the local government.  We would recommend that the Legislature revise the funding distribution split between cities and counties to ensure that those entities who have not yet received any CRF funding have access to these vital funds.  To that end, we would recommend that the CRF allocations be revised to provide $1 billion to counties and $750 million to cities.  This distribution split would ensure that the 476 communities that have not received any CRF funding, will be provided additional resources.
COVID-19 has decimated Modesto’s local economy. As a result of the Governor’s stay at home order and the sales tax deferral program, these impacts are estimated to amount to $11.3M. Additionally, our unanticipated expenses include the rapid activation of an emergency operations center, procurement of personal protective equipment, initiation of frequent facility sanitizing, and other essential costs required to ensure the safety of the public and employees are expected to easily exceed the allocation of funding that the City would receive under the current May Revise proposal. 

As we’ve experienced over the course of the past couple of months, COVID-19 has not shown mercy to jurisdictional boundaries or industries. For these reasons, the City of Modesto proposes a funding formula that is fair to all cities and strongly opposes the arbitrary allocation of funds to larger communities at the expense of smaller cities, and requests your support. We are happy to meet with your office to discuss potential options that we can explore to ensure that all cities can meet this moment.
May 05

COVID-19 and the Budget

Posted on May 5, 2020 at 3:13 PM by Thomas Reeves

As we all continue to practice safe distancing from one another in this crazy time in which we’re living, I miss seeing all the foot traffic around Tenth Street Place.  I stood out in front of the building (our City Hall) the other day and, looking out onto 11th Street at all the quiet storefronts, I couldn’t help but feel a sense of anxiety over the question of when life will get back to normal.  And yet by now we’ve all come to some level of realization that life won’t simply get back to normal, or at least not the normal we were comfortable with before COVID-19.  

Today Governor Newsom mapped out a general framework for how he anticipates “re-opening” the economy through non-essential businesses.  No one knows for certain how long this pandemic will disturb us, but every economist agrees this pandemic has and will continue to substantially and negatively impact our economy.  

I don’t mind telling you I am concerned about our local economy and the City’s ability to sustain services.  Several of our major revenue categories, including sales tax and transient occupancy tax (hotel tax) have been severely compromised in the current fiscal year, and will continue to be impacted next fiscal year. 

We anticipate falling short of our budget targets, and the loss in revenue will have a significant impact on the City’s year-end financial position.  As we move into estimating potential impacts to the City revenues for Fiscal Year 2020-21 and beyond, the picture becomes less clear.  We know that losses will continue – and make no mistake, the losses are projected to be deep – but to what magnitude is still to be determined.  

You may have heard about potential funding sources in the form of federal stimulus packages. One directly benefits Stanislaus County (The CARES Act) and the other, not yet voted on by Congress, may provide direct funding to cities of our size.  We are closely monitoring and working with our local legislators to express our needs, but it is still too soon to say whether or not either of these sources will directly benefit this city.  

In the midst of this pandemic, the Modesto leadership team is keeping a watchful eye on this year’s budget, and also trying to develop a balanced budget for the next fiscal year.  The impact we are projecting this to have on our current year budget is profound and we are doing all we can to stem the losses in revenue by reducing expenses; I’ve already authorized a spending and hiring freeze through at least the end of June and it will likely continue for the foreseeable future.  

These are uncharted waters we’re all navigating across, and I appreciate your support and understanding.  The COVID-19 virus has caused us all to take a hard look at our own personal and business finances, and I'm sure you would agree that it’s not an enjoyable exercise.  

Change is not always fun, and it’s likely the only thing we can count on during this challenging time, but I am confident in this: change brings growth.  

And I am all for growth.