The city of Tracy will reach into its general fund reserves again this year, spending about $3.3 million more out of its general fund than the city expects to bring in.
The city’s finance officials are confident that they can reverse that trend in coming years with the help of Measure V, the half-cent sales tax approved by voters in 2016, along with increases in property and sales taxes.
Meanwhile, the hiring of new city employees will slow down over the next year. The 2019-20 budget represents the third year of growth, about 11 percent since 2016-17, to increase the city’s staff, with the combination of full-time and part-time workers adding up to the equivalent of 532 full-time employees. It includes only five new hires in the coming fiscal year.
City Finance Director Karin Schnaider and Budget Officer Thomas Hedegard provided their summary to the Tracy City Council on Tuesday night, and the council approved the spending plan on a unanimous vote, well in advance of the June 30 deadline to approve a municipal budget. The city’s fiscal year begins July 1.
“I do have concerns that we’re working with a deficit budget for multiple years,” Councilman Dan Arriola said. “It seems like we’re relying on vacancy savings or relying on not filling hours or positions. If that doesn’t come to fruition, what other alternatives do we have? Because at the end of the day I want to make sure we are fully staffed, and at the end of the day I want to make sure our employees get the benefit of their work.”
Schnaider said her goal was to make spending sustainable in the long term, projecting out 10 years.
“That’s one the reasons we strongly recommended that in at least the next two years, that we really hold steady on a constant budget,” she said. “When you increase your staffing by 11 percent, it takes a while to absorb what that new organizational structure looks like.”
The centerpiece of the city’s $228.1 million spending plan is the general fund, where the city plans to spend $70.4 million on day-to-day operations. The general fund is expected to bring in $79.1 million, including $60.7 million in taxes.
Public safety, including police and firefighter salaries and equipment, accounts for the biggest share of general fund spending. The city will spend about $45.6 million on police and fire protection in the coming year. That’s an increase of $2.7 million from this year, and it supports all five of the new hires expected in 2019-20: an administrative assistant, two police officers, a police sergeant and a fire department division chief.
While general fund revenue will outpace spending by about $8.7 million, the general fund budget also calls for $12 million to be transferred out of the fund, mostly to pay for projects promised under Measure V. Among them are an aquatics center, expansion of Legacy Fields, a multigenerational recreation center, and upgrades and expansion of the city’s senior center.
The transferred money ends up going to the capital improvement budget — a $32.4 million spending plan and the second biggest part of the overall budget after the general fund — which pays for buildings, parks, roadways, and water, sewer and storm drain lines.
The resulting $3.3 million general fund deficit will continue to draw down the balance of that fund, which acts as a reserve account. The balance stood at $38.3 million in 2017-18, and deficits in the past two years’ budgets have dropped it to $29.9 million under the 2019-20 budget.
Schnaider said she’s confident that property tax revenue will see a steady 5% annual increase in 2019-20 and beyond, and sales tax income is on a pace to expand by 2.3%.
Meanwhile, the revenue from Measure V is expected to be about $9 million, a number that should stay constant for the next 18 years. The city expects the general fund spending deficit to shrink to about $1.8 million by 2021-22, with income catching up to expenses after that.
In 2019-20, the city plans to double its spending under the capital improvement budget. Most of that money comes from fees on developers, and it adds up to $31.7 million for the coming year. It’s a fairly steady revenue stream, but it was up to $43 million in 2017-18.
The city spent about $16.8 million on capital projects last year and plans to spend $32.4 million in the coming year. The biggest share of the capital budget goes to the Tracy Infrastructure Master Plan, which will increase from $11.8 million to $17.7 million. About $10.1 million will go toward wastewater projects, including new lines for recycled water.
The city also expects to increase its spending on industrial areas, including a total of $3.9 million for the Northeast Industrial Area and $3 million for the Industrial Area South. New and improved roadways are also featured in the capital budget.
Hedegard noted that the rest of the city’s funds — the enterprise funds supported by user fees, including solid waste, water, wastewater, transit and the airport — run on balanced budgets.
The city’s overall budget of $228.1 million is supported by $220.3 in revenue this year. While that represents a $7.8 million deficit, the city has seen surpluses in past years, including more than $53.2 million in 2017-18, when development fees and water fund revenue were high and general fund spending was low.
In other action on Tuesday night, the Tracy City Council:
Agreed to spend $1 million over the next three years to hire crossing guards for intersections near schools in the Tracy Unified and Jefferson school districts. It’s the city’s 50% share of a contract with All City Management Services Inc., with Tracy Unified School District paying for the other half of the contract.
Agreed to hire Delta Wireless Inc. to maintain the Tracy Police Department’s radio equipment for the next three years. The total cost of $304,416 is already in the police department’s budget.
Approved an ordinance updating speed limits around town. The ordinance affirms that the city did the traffic surveys required under the California Vehicle Code, allowing the city to use radar to enforce speed limits.
Approved a final subdivision map for the 304-unit Harvest in Tracy apartment complex on Henley Parkway. The action allows the developer, LTMT Tracy LLC, to convert rental units in the complex to owner-occupied condominium units.
Agreed to spend an additional $145,000 with Barth Roofing of Tracy on roof improvements for the Tracy Police Annex at 400 Civic Center Drive. The Police Annex roof was expected to cost $185,488, but a recent structural analysis showed that a new layer of materials on top of existing roof membranes would exceed the load capacity of the roof, requiring removal of materials before the new materials can be installed. The city originally budgeted $364,500 for the project before it awarded the contract in November, so the change order won’t put the project over budget.
Approved an increase in spending of $46,000 for a splash pad at McDonald Park at the corner of Central Avenue and South Street. The city had budgeted $521,000 for the project and Cazadoro Construction of San Francisco came in with a bid of $379,700. The contractor learned that the underground water recirculation tank that was in the original project design would be insufficient to support the weight on top of it, requiring an upgrade to protect the tank from damage.
Approved the final subdivision map for the Kagehiro Phase 2 development. Taylor Morrison California LLC will build 62 homes on 11.76 acres just north of Valpico Road between Corral Hollow Road and Sycamore Parkway. It’s the final part of a 252-home development that gained initial approval in 2013.
Accepted completion of the latest phase of Legacy Fields just north of town along Tracy Boulevard. The city spent $6.3 million for a new baseball field, foul line fencing for five baseball fields, a maintenance yard, two restroom-concession buildings, one more building just for restrooms, and concrete pathways and parking pads for food trucks. The city had $311,132 left over from the original budget and forwarded that money to the next phase of the project.
Annexed 11.9 acres of the Mariani Business Park, near the old H.J. Heinz Co. plant at 11th Street and MacArthur Drive, into the Tracy Consolidated Landscape Maintenance District. It allows the city to collect $5,334 each year from the property owner to pay for maintenance of city-owned landscaping in the area.
An item that would change some of the details in the Tracy Hills Specific Plan turned into a discussion about the naming of parks and streets in the 2,732-acre development. In reviewing the proposed changes, residents and council members noticed that the developers had already named three new parks, Tracy Hills Park, Starcross Park and Greymont Park. The council determined that it should open up the naming of parks in Tracy Hills to public input.
Approved an employment agreement with interim City Attorney Leticia Ramirez. Ramirez had been the assistant city attorney and has served as city attorney since the resignation of Tom Watson, who left the city two weeks ago to take a job as the city attorney for Santa Maria. Ramirez gets a 10% raise, to $16,536.41 a month, for as long as she stays in the position, and she can return to her job as assistant city attorney once the city finds a permanent replacement for Watson.
The council discussed the San Joaquin Local Agency Formation Commission’s proposed changes to the city’s sphere of influence, the boundary that determines how far the city can expand in a given time frame. Assistant Development Services Director Bill Dean noted that county planners assume that most vacant land on the city’s northern and eastern borders is under a 30-year development timeline, while city planners expect that much of that land could be developed within the next 10 years.