Being Fiscally Conservative - When Is It Too Much
These past few weeks on the Council we have been holding study sessions leading up to a review and ultimately approval of a budget for the 2010 – 2011 fiscal year. As part of this process we have been looking at projections for five years, ten years and even twenty years simply to make sure, to the best of our ability, that what we are doing today is not going to impact on what we have to do and want to do in the future.
On Monday, March 22, we held a study session that looked at funding for capital improvement projects and to consider a new policy for establishing and maintaining operating reserves. Capital improvements include such things as street resurfacing, park infrastructure replacement, levee improvements and the like. Throughout Foster City’s history these types of projects have been funded by one time funding sources, such as the sale of City owned property. Today, we are almost built out and have very little undeveloped City owned property left, so we must now look at replacement costs and funding for those projects.
In addition, a prior City Council had established as a policy to maintain a minimum of $10 million in reserves. While this number currently represents about one-third of our general fund budget and is currently adequate, we believed that the policy should be to set the reserves as a percentage of the general fund budget so that as costs increase over time, reserves are increased so that there is still a significant operating cushion. We decided to establish 33.3% as that percentage, giving us a reserve that would carry the City for four months.
The good news is that we are expecting reserves as of the end of this fiscal year to be well in excess of the 33.3%. Moreover, even with a projected structural deficit going forward, and even with establishing reserves for capital improvement projects, we expect to have reserves in excess of 33.3% five years into the future. Of course, the economy can still change and these are just projections, but compared to most cities, Foster City is in excellent shape and is working hard to remain that way. In April and May we will be looking at ways of balancing the budget for upcoming years so that we are doing our best to sustain this rosy picture.
In contrast, many other local cities are not in such good shape. For example, last week San Mateo and Burlingame announced the possible consolidation of their Police Departments. On Monday, San Carlos announced that it is considering either a merger with another city or contracting with the County to provide police and fire services and disbanding their city services altogether. The logic behind these moves is that it is cheaper for smaller cities to share police and fire services than to have their own.
I am not the first to say that the police and fire services that we receive here in Foster City are second to none, but I firmly believe it to be true. In fact, I just received the honor of awarding Foster City Employee of the Quarter to Police Officer Bill Beck, who is not only a leader in his job at the Police Department, he is a community leader and an inspirational person. Frankly, our City is filled with employees of the caliber of Bill and the services they provide to us are simply outstanding.
However, the fact remains that sharing services and in some cases contracting for services is a way to potentially save substantial revenue for the City. Right now, we are not facing the dire circumstances that other cities are facing. But the question remains whether we should wait and see what happens or should we look now at the pros and cons of these alternatives before we are facing the crises that these other cities are currently facing?
Maintaining the level and quality of city services is paramount, but as anyone who has even gazed at a newspaper or the evening news in the past few months knows, governments at all levels need to cut spending and become more fiscally conservative. Foster City has been fiscally conservative for many years and that is why we are in the great shape we are in today. If, however, we do not continue to manage the process proactively we could be faced with a crisis tomorrow.
So how is this balance maintained? When does being fiscally conservative come second to quality of services? Should our fiscally strong city look into these issues now or do we wait? These are important issues, that even in good times your City Council grapples with. What are your thoughts?
I am, as always, very interested to hear what you have to say. You can reach me by email – firstname.lastname@example.org or by phone (650) 286-3504. Thank you.
March 31, 2010
Being Fiscally Conservative - When Is It Too Much
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