Mountain View's motto for 2017 might as well be "more money, more problems."
Diving into the city's annual budget last week, Mountain View's elected leaders took a magnifying glass to a $128 million plan for coming fiscal year. To sum it up: the city has never had such a fat wallet, but it faces a growing list of expenses, as well as some hard choices.
Much of the time at last week's initial round of budget talks was spent on one particularly big expense -- the city's mounting CalPERS liability. As of June, the city's total liability to the state pension fund valued at $194 million, and that cost is only expected to grow in the coming years. CalPERS officials have indicated they will be gradually requiring cities and other public agencies to pay more in the coming years.
"It's very frustrating -- it seems like regardless of what we do, the costs continue to go up," said City Manager Dan Rich. "It's hard, but it's our job to figure out what to do with this."
The good news is that Mountain View has already set aside about 72 percent of that liability, roughly $139 million. At the meeting, city staff presented a variety of plans to chip in about $12 million more to raise that funded portion closer to 80 percent. The more money the city pays now, the more it would save in the long run, city staff said.
But where could the city find an extra $12 million? That question dominated the meeting as City Council members looked for convenient funding sources that would still leave their favorite projects untouched.
Under a plan put forward by the city's finance team, Mountain View would draw about half that amount ($6 million) from its reserve fund, a pool of money normally set aside for emergencies. But by doing so, they warned, the city would need to tweak its longstanding policy to keep at least 25 percent of its general fund in reserves, which could threaten the city's AAA bond rating. That isn't very likely, said Finance Director Patty Kong. She assured the council that bond-rating agencies would probably look favorably on the "positive action" the city took to pay off its pension costs.
Still, some council members said they were nervous about touching the city's $26 million in emergency savings for something that was hardly an emergency. Councilwoman Margaret Abe-Koga suggested pulling money from the city's other funds to keep its reserves intact.
"I'm concerned with touching the general fund reserve -- it's always been 25 percent and we haven't touched it, even though during the Great Recession we were tempted to," she said. "We're here now based on that policy and it's important to keep it moving forward."
Instead, Abe-Koga suggested taking money from other sources, such as funding for a city child-care center and accounts set up for Mountain View to quickly buy land for affordable housing projects and open-space.
But most other council members didn't have any qualms with using the reserve money. Mayor Ken Rosenserg called it "lazy dollars" that could fetch a much higher return if they were invested elsewhere. Meanwhile, Councilman John McAlister balked at the idea of defunding other city projects to pay off the CalPERS cost early.
The city earns a meager 1 percent interest on its savings, but CalPERS funding is estimated to fetch about 7 percent. Based on that difference, Councilman Lenny Siegel proposed trying to go further, perhaps throwing in more reserves to fund CalPERS up to 90 percent.
"This is a question of why keep money in my checking account rather than keep it in my savings?" he said. "This is an investment; the money isn't going away ... It's just another reserve."
A thin majority of the City Council gave consent to have city staff start making plans to draw the money from the reserve fund.
The proposed city budget calls for adding about 24 full-time positions, mostly for the city's Community Development and Public Works departments. More than half of those positions are limited-period positions, not intended to be permanent.
In addition, city officials said they will likely increase utility fees on local residents. City staffers are proposing a 7 percent increase in water rates, stemming from a significant reduction in water usage brought on by the drought. City officials and other agencies have been encouraging households to reduce their water use in recent drought years, which means the city is losing money from selling less water. A 10 percent increase is also planned for the city's sewer service, which staff members said is due to infrastructure costs. Garbage service is also expect to rise by 10 percent due to higher maintenance costs.
The city is just at the beginning of the multistage budget process, which will be finished up by June.