Tag Archives: Berkeley pension liabilities

City Manager Christine Daniel details Berkeley’s finances

Christine Daniel
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Isabelle Gaston, president of the North East Berkeley Association, recently did an email interview with Christine Daniel, Berkeley’s City Manager, about the financial health of Berkeley for NEBA’s newsletter. Gaston provided the interview for reprinting on Berkeleyside. It has been edited to conform to Berkeleyside style:  

Gaston: How would you characterize the overall financial health of the city? 

Daniel: The City of Berkeley weathered the financial downturn better than many jurisdictions. While reductions in staffing were felt throughout the city organization and resources for a variety of programs were reduced or eliminated due to decreased funding from sources such as the state and federal governments, Berkeley property values remained relatively stable compared to values in the region, and sales taxes, while suffering a decline in FY 2010, have recovered.  However, property transfer taxes suffered a significant decline which affected the city’s ability to invest in infrastructure maintenance. Those revenues are now beginning to recover, but are not yet at pre-recession levels.  … Continue reading »

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Berkeley council looks to IT to transform city operations

An IBM AS/400 minicomputer. It was once high technology. Photo: nSeika
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Discussion about potential rival ice cream stores on Telegraph Ave. consumed nearly two hours of the Berkeley City Council meeting on Tuesday night, with supporters of the two retailers crowding the chamber. For the first public hearing on the city’s budget for fiscal years 2014 and 2015, and comments on the citywide work plan for FY2014? Less than an hour in a council chamber emptied of the public, but with every city department head in attendance.

But despite the apparent lack of public interest, a lively debate sprung up among council members about how the city should be using technology.

“We’ve cut our employees and we’ve cut our days of work and we’ve been able to maintain core services very well,” said Councilmember Susan Wengraf. “But as we continue to cut and try to be more effective we have to pay more attention to our technology department. This is basically the circulation system of the entire city. The key to becoming more effective in the future is to implement better use of the Internet and to get more efficient programs for whatever the city has to do.” … Continue reading »

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Dog license fees to rise, other Berkeley Council decisions

Animal services head Kate O'Connor in front of the new animal shelter. Photo: Emilie Raguso
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Raised fees for a number of city services were agreed on Tuesday night by the City Council with relatively little debate and no public comments. Dog licenses will at least double: from $7.50 to $15 for a one-year altered dog licence and from $18 to $40 for a three-year altered dog license. Fees for animal adoptions from the city shelter are also going up.

Kate O’Connor, manager, Animal Care Services, said that her department estimated there were about 40,000 dogs in Berkeley. In FY12, 1,722 animal permits were issued (virtually all for dogs — she said only two cat licenses were issued). O’Connor’s estimate was that 20-25% of Berkeley’s dogs are licensed, which Councilmember Laurie Capitelli pointed out is probably an overestimate given the number of issued licenses.  … Continue reading »

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Pensions, infrastructure key Berkeley budget liabilities

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Berkeley’s City Council on Tuesday night received the first biennial report on the city’s long-term liabilities. The detailed breakdowns in the report from city budget manager Teresa Berkeley-Simmons make clear that the main areas with significant liabilities are police pensions, maintenance of city facilities, and watershed and storm drain maintenance and improvements.

Speaking about the presentation of the report, Berkeley City Manager Christine Daniel said she hoped the Council would agree that budget reporting was improving generally and that the council members’ feedback would contribute to even more enhancements. She said the genesis of the current report could be traced back to 2005 when staff produced a report on employee benefits, then in 2008 when staff started putting information about unfunded liabilities in the budget document, and finally in the fall of 2011 when presentations were made on the status of capital assets and infrastructure. … Continue reading »

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Budget: Spending cuts needed to avoid shortfall

Calpers
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Berkeley’s General Fund projections include a deficit of more than $5 million over the next two years, requiring city leaders to take a tough look at its more cash-strapped departments to reign in costs.

To close the gap, the city’s budget manager has recommended recurring 2% General Fund reductions across the board for city departments. Departments will present their recommendations to the city manager and City Council in the coming months.

In a work session last Tuesday night, the city’s budget manager gave Berkeley City Council members a forecast for the next two years, and pointed to areas that may pose challenges going forward. (See a PDF of her presentation.)

Three more work sessions have been planned to allow council members, city staff and members of the public to learn more about, and weigh in on, city finances. Scroll to the bottom of this story to see the dates for upcoming public meetings on the budget.

Council members called the presentation, by budget manager Teresa Berkeley-Simmons, “sobering.” … Continue reading »

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Berkeley General Fund revenues may fall short in 2012-13

Berkeley on a hazy night. Photo: Joe Parks
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City staff were “overly optimistic” in budget projections for the fiscal year that ended in June, but Berkeley’s General Fund still ended up several hundred thousand dollars in the black for 2011-12, the city manager told council members Tuesday night.

City Manager Christine Daniel told the Berkeley City Council that “exceptional expenditure control” allowed the city to end the fiscal year without a General Fund shortfall that had been projected to hit $1.9 million.

“Everybody managed very carefully and that’s how we managed to end the year in that way,” she said Tuesday night during a special session on the Berkeley city budget that took place prior to the regular City Council meeting. … Continue reading »

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Unfunded liabilities prompt initiative, council resolution

Measure M will provide more funds for improving streets, but it still will fall short of the need. Photo: Tracey Taylor
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A ballot initiative to force the city to do biennial reports on obligations for employee and retiree expenses and for Berkeley’s physical infrastructure and capital assets appears likely to appear on the ballot in the November election, according to supporters of the plan. At the same time, at tonight’s City Council meeting a similar measure is being proposed by four councilmembers, led by District 5′s Laurie Capitelli. The council measure, however, lacks the penalties for failing to produce the report that the initiative draft contains.

The ballot initiative is called the Berkeley Fiscal Accountability, Clarity, Transparency and Sustainability Ordinance of 2012, which shortens to FACTS. It would require biennial reports on the city’s financial obligations for the next 20 years, and would prohibit the City Council or the voters from “incurring any debt financing, or imposing any new tax, assessment or property-related fee, or increasing any existing tax, assessment or property-related fee, or scheduling an election to impose or increase and tax, assessment or property-related fee” unless the report required in the ordinance has been published and certified. … Continue reading »

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Berkeley faces difficult path to funding pension liabilities

Closer to fine
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The City Council heard a sobering report from outside actuary John Bartel at its special meeting on Tuesday night this week.

“I wore my Valentines Day tie, but that’s unfortunately the only good news I have here,” Bartel said. “Your contribution rate will not be going down. It will actually be going up in the future.”

The council has had a number of presentations on the unfunded pension liabilities in the last year. On Tuesday, Bartel explained that the actuarial target he was encouraging the city to meet was to reach 100% funding of the liabilities “over a reasonable period of time”.

But the difficulty of achieving that was highlighted by the figures Bartel presented. For the police safety plan — overwhelmingly the largest cost and the largest unfunded liability for the city — the city is currently paying 42% of salary in pension contributions. To reach a target of 80% of the liabilities funded in 20 years, Bartel said the city contribution would have to rise to 50.7%. To reach 80% funded in 10 years, the contribution would climb to 61.5%. … Continue reading »

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City budget faces $1.8 million mid-year shortfall

City Manager Phil Kamlarz
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The City Council tonight will hear a report on mid-year budget revisions for the current fiscal year, designed to respond to a revenue shortfall of $1.8 million. According to City Manager Phil Kamlarz, planned savings are already on track for $1 million. The remaining $800,000 of the deficit will be covered by deferring capital expenditures, primarily from the street rehabilitation budget. An increase in projected expenses from the adopted budget is being covered from $4.62 million from the reserves.

The trimming of the budget comes on top of the effort to close an expected $16 million deficit in the FY2011 budget before it was adopted by the council last year. The original plan was to eliminate 77 jobs, 47 of which were unfilled at the time. Because of the voluntary work reductions by staff and other cost saving measures, including a hiring freeze, that gap was closed with only seven layoffs, Kamlarz explained during a briefing meeting with the media this morning.

The drop in revenues compared to the adopted FY2011 budget came from a wide number of sources:

  • Secured property tax: down $528,083 because the expected 2% cost of living adjustment actually was -0.24%
  • Utility users tax: adjusted downward by $494,084 because of declining natural gas prices
  • Parking fines: projections lowered by $200,000
  • Ambulance fees: down by $463,370 because of change to a national fee schedule and lower transport volumes
  • Sales tax: down by $216,136 even though revenues are beginning to creep up
  • Franchise fees: decreased by $279,844 … Continue reading »
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Government

Council faces tough decisions on unfunded liabilities

Mayor Bates: "people will need to start contributing"
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The Berkeley City Council special session on the $310 million — or higher — unfunded liability on promised employee benefits revealed the difficult choices faced by the city.

A presentation by budget manager Teresa Berkeley-Simmons made the root of the problem clear. The California Public Employee Retirement System (Calpers) assumed annual investment returns of 7.75%. The crash of the Great Recession in 2008 meant that returns in the fiscal year ending June 30, 2009 were negative 24%, producing an annual loss against assumptions of 31.75%. For Berkeley’s city employees, that has produced investment losses of $200 million.

“We can’t grow our way out of this,” Berkeley-Simmons said.

“Even if Calpers gets 7.75% forever now, they have lost $200 million on which we’ll never get 7.75%,” explained City Auditor Ann-Marie Hogan.

City Manager Phil Kamlarz said the money to close the gap has to come from either increased contributions or a reduction in cash available for city services, or some combination of the two. Long term, the gap can be closed by reduced benefits for new employees, but that does little in the short and medium term.

“Rather than cut services, people are asking employees to contribute more,” said Mayor Tom Bates. “That’s the path we have to go down. People will need to start contributing more. It’s unfortunate, but they’re lucky to have a job.” … Continue reading »

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Government

Special council session to consider employee benefits

City Auditor Ann-Marie Hogan
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The City of Berkeley’s unfunded liability for employee pension benefits will be the focus of a special City Council work session at 5:30 p.m. before the regular council meeting next Tuesday.

In an email about the session, City Auditor Ann-Marie Hogan wrote, “The City Council, City Manager, and City employees will have to take some very difficult actions. The decision makers and the community need rigorous analysis, clear communication, and realistic expectations. A commitment to collaboration can help us through these difficult … Continue reading »

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Berkeley auditor report shows $310m benefit debt

The City Council currently meets in the Maudelle Shirek building but is looking for new meeting space.
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The city of Berkeley has an unfunded liability for promised employee benefits of $310 million — which equates to $197,000 for every full-time city employee — according to an eye-opening story by Daniel Borenstein published in the Contra Costa Times on January 8.

The piece, which takes as its starting point a November 16 report by Berkeley city auditor Ann-Marie Hogan, claims that the city has spent beyond its means, and will have to make difficult choices on whether to … Continue reading »

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