Hiring freeze enough to ward of layoffs, cuts in Richmond

By Katherine Tam
West County Times

Posted: 02/18/2009 06:11:59 PM PST

Declining property tax revenue is forcing Richmond to hold off on filling dozens of vacant positions as part of efforts to close a projected $1.9 million budget shortfall this year.

The 77 positions are distributed across city departments, and the savings from their combined salaries and benefits are more than what the city needs to reach a balanced budget. The city manager still has the flexibility to fill vacancies as he sees fit, but he said he will do so sparingly, on a case-by-case basis.

Officials won't have to lay off workers, cut public services or dip into the reserve fund, City Manager Bill Lindsay said.

"We don't need to do anything drastic, and I think that's good because some other cities are having to make some real drastic measures," Lindsay said. "There are some staffing vacancies we just want to hold onto as vacant."

Officials are bracing for further losses in property and sales tax revenue that could spell tougher times ahead.

Lindsay said the city must be "very careful, we need to be cautious. What will be very important for us to do over the next few years is to try to keep our services as stable as we possibly can."

The city has added police officers and staffing at community centers, as well as some services, since a period of severe budget cuts in 2004. Lindsay said officials don't want to cut services they've brought back, but might not be able to continue expanding them for a while.

The City Council on Tuesday night took a midyear review of the budget, which carried conservative projections and now has been reduced by $1.9 million to $138 million.

Property tax revenue, which makes up nearly one-fourth of the general fund, took a beating and is expected to come in $1.7 million below the $34 million projection, Finance Director Jim Goins said.

With fewer homes being bought and sold in the sagging economy, revenue from the documentary transfer tax — which is imposed on recorded documents when property changes hands — is expected to be less than $1 million this year, down from previous highs of $7 million a year, he said.

Interest and investment income has declined by $1.5 million, largely because the Federal Reserve Board reduced interest rates to try to revive the credit markets.

Sales tax revenue is meeting the $22 million projection, in part because stores such as Wal-Mart, Costco and the new Target continue to thrive, Goins said.

Councilwoman Maria Viramontes, who heads the Finance Committee, added that the city's corporate sales program encourages larger businesses to buy goods in Richmond so the sales tax stays in the city.

Money infusing city coffers this year includes $5 million from the $50 million sale of the former Naval Fuel Depot Point Molate, and $6 million from Chevron through a community benefits agreement that officials signed last year — on the day they approved the oil company's plan to replace decades-old equipment at its refinery.

Meanwhile, several state grants remain frozen until state lawmakers approve a budget. These grants affect the second renovation phase of the Richmond Municipal Natatorium, or "The Plunge"; renovation of the MLK Community Center; and video surveillance and Bay Trail work at the port.

Next year, sales and property tax revenue is expected to continue downward. Officials estimate nearly 10 percent of homes will be in foreclosure by March 2010. In addition, they still face a backlog in road repair amounting to $19 million a year that has yet to be funded, as well as a $2.4 million deficit in storm drain work.

Goins is hopeful the city will be able to weather the worst of the recession. He points to a diverse economy that pulls in revenue from different retailers and other businesses. Chevron is paying fees and taking out permits for its equipment-replacement project. And the city can secure lower interest rates because of its strong credit rating from various independent agencies.

"We've positioned ourselves as well as we can for our future, and I'm optimistic about us being successful," Goins said. "If we can maintain our stability in the next two or three years, we'll be fine. And stability means we have to spend less than we make."

Reach Katherine Tam at 510-262-2787 or ktam@bayareanewsgroup.com.