The Update: Alameda’s budget

The Update: Alameda’s budget

Michele Ellson
Alameda budget

THE STORY: About this time every year, the City Council considered a new annual budget – until last year, when City Manager John Russo and his team put Alameda on a new, two-year budget cycle. On Tuesday night, the council okayed changes to the budget for the new fiscal year, which begins on July 1.

THE LATEST: The city’s new projections show City Hall spending $1.3 million more than originally planned in its general fund, which covers basic services like police and parks and bring in about $300,000 less this year than originally forecast, leading to a $3.5 million shortfall in a $78 million general fund budget. Almost all of that shortfall will be covered by funds budgeted but not spent during prior years. Additional costs include $66,000 more for water to Alameda’s parks due to rising water rates, $50,000 to help renovate Krusi Park, $39,000 to gas up the fire department’s new fire truck and boat and $50,000 to send staff to advocate for the city in Washington. Lower revenues include the anticipated loss of $150,000 in garage revenues paid by the school district, housing authority and Alameda Municipal Power and a $71,705 reduction in anticipated revenues generated by the fire department’s pilot basic life support ambulance transport service.

MORE INFORMATION: City staffers have summarized the changes they’ve made to the budget in the PowerPoint presentation embedded at the bottom of this post. The full budget is available on the city’s website.

 

Mid Cycle Update Powerpoint - City of Alameda

Comments

Submitted by Robert T. Sullwold on Thu, Jun 5, 2014

The City likes to separate an item it calls “carryover from prior years” from the item it calls “use of fund balance” to make it appear that the amount of the withdrawal from General Fund reserves needed to cover an operating deficit is less than it really is.

What they call a “carryover” is simply the difference between the actual and projected fund balances in one or more prior years. So if they projected the ending balance would be $25 million and it turned out to be $26 million, they call the $1 million difference a “carryover” and treat it as if it were additional revenue to spend in the following year. Under this logic, if you made $50,000 this year and planned to spend all of it, but you spent only $49,000, you have an extra $1,000 to spend next year.

If you go back to the FY 2014-15 budget, you’ll see that the City always intended to “use” the “carryover” for additional spending. The FY 2014-15 budget projected that expenses would exceed revenues by $1.8 million. The “carryover” would be used to make up the shortfall. What has happened, as the piece points out, is that revenues are now projected to be lower, and expenses higher, that the amounts budgeted a year ago. So now the City has to use more of the “carryover” to make up the shortfall.

But let’s be clear: however the City may try to spin it, when they use the “carryover” to cover a deficit, it’s money coming out of General Fund reserves. So the chart included in piece shows that, for FY 2014-15, the City will incur an operating deficit of $3.5 million, which will be covered by a drawdown in reserves in an equivalent amount (the $3.4 million “carryover from prior years” plus the $.1 million “use of fund balance”). It’s no different than taking money out of your savings account to pay your bills when you haven’t earned enough to pay them out of your salary.

For a more detailed explanation, see http://alamedamgr.wordpress.com/2013/05/22/our-little-secret/.

A final word to the wise: The next time the Mayor talks about how her administration has "balanced" the budget -- and she surely will -- remember that, to her, a "balanced" budget means something different than it means to an ordinary householder. It doesn't mean you've earned enough to pay your bills. It means you've still got enough in your savings account to keep from going broke -- for now.