Budget Challenges
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Budget Challenges
Much has been written about the poor economic climate, budget deficits, growing unemployment, and the potential for a weak and lengthy recovery. These are obviously the most pressing issues facing our City. The economic woes of the federal and state governments continue to have adverse impacts on local governments and there is little reason to expect that to change in the near term.

Many municipalities develop the next year’s budget viewing one year at a time. For many years now, Foster City has looked at the financial projections for the next five years to influence budget decisions for the next year. This budgeting methodology has served Foster City very well in the past and will continue to do so as we move forward.

There have been many good financial years and some difficult ones. When revenues are expanding at a greater pace that expenses, the budget process is something less than a difficult process. However, when revenues decline and expenses do not, challenges present themselves and difficult decisions must be made. Foster City has maintained an historical fiscal management philosophy to make sure that monies were spent prudently and in the best interest of its residents.

Recently, the City Council approved a policy of maintaining a minimum reserve balance of 33% of one year’s expenses. The good news is that starting in the next fiscal year which starts on July 1; your City has a Reserve balance of $20 million or approximately 65%. However, the good news stops there. Next year’s projected budget shows an operational deficit of $3.5 million and when combined with the forecasted operational deficits in each of the following 4 years the reserve balance would be reduced to just $3.7 million or 11%. This is the stark reality of how a continuing weak economy is forecast to affect our City. This touch of economic reality does not include any expenditure cuts.

The majority of the City’s revenues come from property taxes and though our property tax assessment has been allowed to be increased each year, such is not the case this year. The property tax assessment will go down ever so slightly for each of us, but cumulatively it will have a large impact on the City’s revenue stream. Our second highest source of revenue is provided through sales tax and I think all of us are aware that declines in retail sales that have been reported though the various media outlets. Our City’s coffers are also impacted by actions taken by the State, County, and even other nearby cities.

This article is not an attempt to paint a portrait of Foster City’s financial health with a ‘gloom and doom’ brush nor does it mean that all is well and calm waters lay ahead. Although we are not in desperate times, we are in changing ones. It will take some serious work with hard choices to be made which in some cases will be unpopular. We will be identifying core services and those that may be classified as unnecessary which may have to be suspended for a period of time or even eliminated entirely. We will have to look at financial issues differently. We will have to review revenues and expenditures carefully and with more frequency as spontaneous changes from the State and County may have adverse affects on the City’s finances and usually do. The City will be having quarterly budget reviews to more closely monitor revenue trends and take appropriate action to keep expenses in line with revenues. We will be looking at the potential for shared services with other cities as well as looking at the potential of contracting services where we can obtain the same or better level of service at a lower cost. We will also be looking at the city subsidized programs which may have to be withdrawn in order to reduce cost.

Although economic predictions indicate a long and slow recovery, your city leaders are diligently working to maintain the sound financial health of our City.
I would appreciate your comments on this and other issues by emailing me at akiesel@fostercity.org.

Council Corner

June 23, 2010
Budget Challenges

City Hall - 610 Foster City Blvd.
Foster City, CA 94404
(650) 286-3200