The city of Sunnyside's general fund, which pays for day to day operations, could be broke by 2013 if the city doesn't change its ways.
That's according to a report published by the city's chief financial officer, Byron Olson, in a memo to council dated Monday, May 23, 2011.
"The largest single concern is the substantial draw-down of the unappropriated fund balance within the general fund," Olson stated in the report, which covered Sunnyside's financial situation through the end of April.
He added that by 2013 the city will need "structural change" - higher fees and taxes and/or cuts - in the general fund to pay for council-mandated program priorities, including a significant hike in police expenses.
Sunnyside started 2011 with $1.2 million in contingency money in the general fund.
City Manager Mark Gervasi hopes Sunnyside can make it through the next two years without dipping into those reserves. Like Olson, he says council will eventually have to look at raising revenues or making cuts.
However council balances the budget, Olson is less optimistic about the contingency fund's fate.
Olson, who is also Sunnyside's deputy city manager, pointed to a $1 million budget amendment council approved earlier this year, about half of which went towards purchases for new vehicles and new hires for the police department.
"Council voted to authorize additional staffing that aren't funded by current revenues," Olson said. "Those monies will come out of the reserve; it's like taking money out of your savings account."
Olson added, "The concern isn't so much for 2011 and 2012, but for 2013. There won't be any savings left over."
So how did Sunnyside get here, and what lies ahead?
Lack of budget discipline
Both Mayor Jim Restucci and Councilwoman Theresa Hancock said a big problem is that staff members present large purchase items after the biennium budget is already approved.
"I am very concerned about where we're going financially," Hancock said. "We're going to have to sit down and have some real discussions about spending after we make the budget."
While supportive of Sunnyside's police force, Hancock said the extra expenses brought forward just a few months into 2011 hurt the city's finances. She said there was also $140,000 approved for a street sweeper, another major purchase presented to council after the budget was done.
"It just seems like we set the budget and we turn right around and overspend it," she said.
Restucci was also disappointed with the timing of Olson's report, coming after instead of before council approved the million dollar budget amendment.
"What we need to do is stop putting money into programs without knowing how much we have," Restucci said. "Council was pushed into providing services for the police department."
The mayor added that part of the problem is council and staff are adjusting to a biennium or two-year budget cycle. "We do have some growing pains," he said.
Added Olson, "You can't demand more services and not be willing to pay for it."
Areas of concern
Those growing pains include the following:
- By the end of 2011 the Sunnyside Police Department is on track to overspend by $300,000, according to Olson. He attributes the shortfall to extensive overtime hours in the police department.
"We're going to have to watch that," Gervasi said.
Overall, police spending in the city of Sunnyside has jumped 50 percent since 2005, from $2 million to $3 million, according to Hancock.
"There is a significant amount of overtime in light of the issues we're facing," Olson said.
On top of that, he noted there aren't enough funds on hand to pay for labor agreements with the police department. "That's coming out of reserves as well," Olson said.
- Legal expenses in Sunnyside have doubled from the amount originally budgeted.
Restucci said the initial contract with Menke Jackson called for the city to spend $12,000 each month on legal services.
"I thought that was pretty high, but it's nowhere near that now," he said. "The last (monthly) bill was $24,000 or $25,000."
Hancock noted part of the increase in legal fees stems from multiple public record requests and IRS problems dating back to 2006.
Sunnyside's legal bill with Menke Jackson for 2011 will likely top $365,000, Olson said in his report.
- Jail revenues are down by about a third from this point last year, Olson noted. That represents a drop of $107,000 in revenues.
"We're holding inmates for the U.S. Marshal's service, and the number of inmates is down significantly from what was budgeted," he said.
- Other budget woes Sunnyside faces in 2011 are declining sales tax revenues, and less-than-expected revenues for stormwater and ambulance services.
Where does Sunnyside go from here?
With costs rising dramatically in some cases and revenues down, Restucci says council needs to hold a special meeting or retreat to talk about finances.
"The most important thing to do now is a financial retreat to talk about where we are at and adjust our budget," he said. "Then we need to keep checking to make sure we're on track."
"It's not sustainable," she says. "We have to figure out where we're going to cut because now we're talking parks and recreation and Boys and Girls Club."
No one's willing to talk about specific cuts, or fee increases at this point.
However, council earlier this year did broach the subject of implementing a $20 car tab fee.
Also, Restucci feels the city doesn't need both a public works supervisor and a public works director.
"We (the city council) don't necessarily feel the city can support both positions," Restucci said. "He (Gervasi) needs to look at those and come back with his recommendation."
Another possibility is hiring an attorney instead of contracting with a private firm.
"We need to talk about legal services and whether or not we can afford to keep an outside law firm or look at hiring an in-house attorney," Restucci said.
Gervasi expressed concerns about hiring an in-house attorney because "you're paying them to learn on the job."
He noted that individual attorneys don't have the breadth of knowledge and experience that a firm can offer.
"We need to look at it," Gervasi said of considering an in-house attorney. "But I don't want to have to wait two weeks for a legal opinion. It needs to be timely."
Nearly halfway through 2011, council doesn't yet know how it will address the budget gap in the general fund.
One thing they all know is the cost of not doing something is unthinkable.
"I'm concerned that we will be dipping into that contingency fund and within two years have to start cutting people and services," Hancock said. "I don't want to be there again, I want to be a good steward."