City Considers Lower Retirement Benefits for New Hires and Furlough Days to Cut Costs

A sickly economy will continue to force the city to tighten its belt in 2012, according to a just-released midyear financial review.

Assuming home sales and job growth continue to lag, the city is looking at several ways to cut costs next fiscal year, from increasing employee pension contributions to reduced retirement benefits for new hires.

"The recession and weak real-estate market [have] continued to negatively impact city revenue growth," according to Administrative Services Director Greg Rogers, who wrote the review. Elsewhere in the report, he says: "Unemployment is remaining stubbornly high and the consensus forecast is that the recovery will likely continue to be slow as unemployed workers try to find jobs and consumers struggle to get their finances in order."

The sluggish economy translates to revenue shortfalls in income, property and sales tax, the report notes. Declining property sales also cut into other revenue sources for the city, including building permit fees and document transfer taxes.

, including shuttering redevelopment agencies, and to propose a June ballot measure that would ask voters to continue taxes that were set to expire.

Bracing for the loss of its redevelopment agency, the City Council .

City leaders also , which will protect $600,000 a year and give the new body, composed of City Council members, oversight of low-income housing responsibilities held by the redevelopment agency.

The report concludes that San Ramon is on track to end the fiscal year at a deficit, albeit a smaller one than expected.

General fund expenditures from July 1 last year to the end of June will come to $37.8 million – 1.8 percent higher than the previous year, partly because of the rising cost of employee benefits. But general fund revenue during that same time dropped 13 percent to $35.5 million, $2.7 million less than the previous year.

To make up the difference, the city will draw $2.8 million from its reserves unless the situation changes. (The "reserves," by the way, aren't actually in the reserve fund. To protect the rainy-day money from state raids, the City Council socked most of it away in other accounts last summer.)

City reserves last summer totaled $34 million. The report predicts San Ramon will end the fiscal year with $31.2 million (although, the bulk of it is technically allocated to four other accounts: the general fund, one for bond debt, another for health-care benefits and the remainder in the Dougherty Valley fund).

Overall expenditures are expected to total $2.2 million less than what the city budgeted. The adopted budget allowed for $88 million in expenditures. The half-year review predicts the year-end figure to be $85.7 million.

Mid-year budget adjustments include $149,000 in unplanned expenses. Of that, $100,000 will cover "operational costs" for the Police Department, $20,000 for new software that allows residents to report crimes online and $29,000 to pay for public access TV costs.

Next fiscal year, the city expects no revenue growth. The cost of employee benefits will increase. And the city will have to figure out how to maintain its service level with less money.

To cope, San Ramon will consider continuing a pay and hiring freeze, the review says. It may also require employees to pay a larger share of their pension costs and take unpaid furlough days.

Another way to reduce personnel expenses is to hire back city workers who had retired and were collecting public-employee pensions. Hiring them on a contract basis means the city gets an experienced employee without shelling out money for benefits and additional pension costs.

Retired workers who come back as consultants also take home less pay because they don't work as many hours, the review says.

The report also suggests that the city establish lower benefit tiers for new employee pensions the way it already did for retiree health care.