Benicia & Beyond – Our Daunting Deficits

The Benicia Herald (no online presence), by Stephen Golub, April 9, 2023. About Steve Golub, below.

Benicia’s budget is in dire straits. As former City Manager Erik Upson, Interim City Manager Mario Giuliani and others have emphasized, our heads are financially below water. We face mounting deficits, stretching for years.

At the risk of being Davey Downer, here’s some daunting data, courtesy of Assistant City Manager Bret Prebula (though any mistakes in presenting or analyzing the figures are most certainly mine):

For Benicia’s current fiscal year, which ends on June 30, the estimated deficit is $2.2 million. That is, our expected expenditures are $2.2 million more than our revenues.

That figure is elevated somewhat by one-time costs of about $1 million for operating and legal expenses linked to the city-owned marina. But…

The city staff anticipates budget deficits of $3-6 million per year for both the 2023-24 and 2024-25 fiscal years.

To put this in context, the anticipated annual city expenditures (excluding water and wastewater, which are budgeted separately) amount to $55-60 million.

Therefore, unless Benicia makes adjustments, we’re looking at an annual deficit of 5 percent to 10 percent of the budget for the next two years and beyond.

Though it’s split into separate categories, the city’s reserve/general fund totals about $22 million. According to my rudimentary math, we could exhaust it in as few as four years unless action is taken.

Finally, unlike the federal government, the city has to balance its budget each year. When I write of expected or anticipated deficits, I’m discussing gaps that must be closed by reduced costs, additional revenue or drawing down the reserve fund.

How Did This Happen?

So how did we sink to this state? Our costs have increased while our revenues have remained relatively flat. More specifically…

The problem partly flows from gradual increases in the costs of city services (whether delivered by employees or contractors), materials Benicia buys and city employee benefits (such as health insurance). In addition…

Revenues are not rising enough to match the increasing costs. Why’s that? First, our population has barely increased since 2000. Also, while our industrial park businesses contribute to Benicia’s economy, they generate less city revenue than a more service/retail-oriented mix of firms would.

What to Do?

Proponents of Measure R, narrowly defeated in November, argue that the ¾ percent sales tax would have gone a fair distance toward addressing our road repair needs.

More broadly, some contend that it’s not just road repair, but also police, fire protection, parks and other city services that will face cuts unless we right the fiscal ship through greater revenues – be they through taxes, fees or other approaches.

Conversely, others maintain that we can in fact make cuts that eliminate or at least decrease the need to rely on new or expanded taxes and fees. In contemplating one kind of cut, though, we might bear in mind former City Manager Upson’s warnings that city employees’ salaries are lower than those in many other Bay Area localities, which can make retaining them difficult.

Another approach prioritizes limiting hikes in taxes and fees mainly to the town’s largest businesses.

Then there’s a perspective that contends that we should rethink whether Benicia should remain a full-service city. That broad blend of services is something most of us like about Benicia. But we could consider whether and to what extent we can afford all this, and what the potential alternatives might be.

My point here is not to provide or promote certain solutions. Far from it. I need to be better educated on these and other options myself.

Instead, I’m just offering a bare-bones account – and it’s admittedly barely even that – of a few potential directions. Benicians who understand municipal finances far better than I do can address this matter far better. Hopefully, though, this column takes a small step toward illuminating the issue.

How to Learn More

So, some food for thought. Here are a couple of ways to start chewing on all this:

On April 11, “Benicia’s Budget Crisis: The Problem and Potential Solutions”, a public forum, will be held in the Benicia Public Library’s Dona Benicia Room. Starting at 7 p.m., and organized by the Progressive Democrats of Benicia, it will feature Mayor Steve Young, Assistant City Manager Bret Prebula and Solano County Supervisor Monica Brown. The presentations will be followed by a Q&A session.

Since some Benicia residents remain especially vulnerable to Covid, masks will be required. Due to the complexity involved, Zoom will not be used for the session.

Again, all are welcome; you don’t have to be a PDB member to attend. You don’t have to be a progressive, a liberal, a moderate, a conservative or whatever. You just have to care about Benicia.

Then, on April 25, the City Council will convene a study session on the issue, starting at 6 p.m., in the Council Chambers. As usual, this Council meeting will be both an in-person and Zoom event.

We Can Get Through This

Crises can bring out the best or worst in folks. They can unite or divide. This one could include tough conversations and decisions in the months and years to come.

I’m optimistic that this challenge will see Benicia responding well. We are a resourceful, resilient community.

I also take heart from the calm, civil Council discussions about the indoor mask mandate back in 2021. (I can’t speak to social media.) Admittedly, the meetings were not warm and fuzzy affairs; they saw sharp disagreements. But, for the most part, they aired diverse perspectives in respectful ways.

Let’s hope the upcoming budget debates take the same path.

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Benicia resident Stephen Golub

A version of this piece first appeared in the Benicia Herald, as part of my weekly Benicia and Beyond column for the Herald. At my blog, A Promised Land, I also write about national and international affairs, including lessons that America can learn from other countries.

My blog: A Promised Land: America as a Developing Country apromisedland.org.