Budget for Fiscal Years 2013-14 and 2014-15
Mayor and Members of the City Council:
I have had several Councilmembers ask me about the current budget process, and “ominous signs of budget deficits” as reported in the West County Times. As a result, I would like to provide you with a status report on staff’s progress in preparing the two-year operating budget for fiscal years 2013-14 and 2014-15.
First, let me briefly describe the process that we use in preparing the operating budget. Beginning in February of each year, the Finance Department requests that all city departments prepare their budget for submittal to Finance in March. Departments are asked to prepare their budgets based on their perceived, realistic operational needs, and are not given “pre-emptive” instructions, such as “cut ___%” or “do not request new staff positions,” etc. We feel that it is important to fully understand what a department’s optimal operating budget is, even though it is well understood that not every budget request can be accommodated. This allows us to evaluate budget priorities both within each department, and, on a relative basis, among the various departments. This will, in turn, allow staff to make an informed recommendation to the City Council.
During this time, the Finance Department staff also prepares a revenue estimate that quantifies the resources available to fund these requests.
Following submittal of the departmental budget requests, and preparation of the revenue estimate, the City Manager and select members of his staff, together with the Finance Department budget team, meet individually with the department head and staff members from each department. This meeting is for the purpose of clarifying the budget request, reviewing the proposed departmental organization chart, reviewing performance measures, and understanding the level of cost recovery, as appropriate. At these initial meetings, we neither reduce the amount of the budget request, although we might provide initial impressions, nor do we approve it. We feel that it is important to wait until we have reviewed each department’s submittal before forming our recommendations.
Following these initial meetings, the Finance Department compiles a very preliminary draft budget based on their initial revenue estimates and the departmental operating budgets as submitted. This preliminary draft provides staff with a ballpark estimate of the budget gap that we will need to close, through some combination of increasing revenues or reducing the requested departmental expenditures. In my years working with budgets in municipal government, I have never experienced a situation where, at this stage in the process, there was not a budget gap needed to be closed.
We are now at this stage of the process for preparing the City of Richmond’s two-year operating budget for fiscal years 2013-14 and 2014-15: we have prepared the preliminary budget, and we have identified the initial budget gap that needs to be closed. This year, the initial budget gap is approximately $20 million, which is approximately 15% of the operating budget that will eventually be approved by the Council. This is more than what we have experienced as a starting point in most years, but less than it has been in other, especially most recent, years when the economy was in a depressed state.
At this stage in the process, I would not describe this budget gap as a “deficit;” it is not a deficit until or unless it is adopted by the Council, and we would not recommend that you consider, even as a starting point, an operating budget with a gap of this magnitude. Our task, then, is to work with the various departments to develop acceptable means to increase revenues and reduce the requested departmental expenditures in a way that allows the budget to be an effective document in its entirety. This work is proceeding now, and, at this point, the budget can best be described as a work in progress.
I need to emphasize that balancing the budget will be especially difficult this year, as it has been in the recent past. At the staff level, we have our work cut out for us before we can provide the Council with a budget that is reasonable for discussion purposes. Nonetheless, this is our short-term goal.
Thanks for your patience. Please feel free to contact me if you have any questions or require any additional information.
City of Richmond
450 Civic Center Plaza
Richmond, California 94804