City budget cuts: Relatively few layoffs, non-profit cuts mark budget plan

City manager Tom Bonfield has teased layoffs -- or, as management sometimes calls them, "reductions in force" -- as a possible way of meeting budget cuts for some time, in print interviews and most recently on last week's "Shooting the Bull."

Today, it became official, in the form of a press release, and in a two-page memo sent to City employees today as well. Thirty-five staff will be laid off, out of a total of 113 positions being eliminated in the FY10 City budget proposal. (A hiring freeze implemented in the fall helped preserve a number of open positions whose elimination could help with future budget needs.)

The 35 affected employees were informed personally last week, in advance of the announcement from City Hall today. The full budget will be released in time for next week's City Council meeting, but based on what's made it out into the public sphere today, we know a few things.

First, don't look for the worst-case (pre-cutback) budget gap to be up in the much-feared $20-40 million range being bandied about in recent months. A key factor driving that number was the pay equity program that started getting implemented this year -- an effort that will be on hold, according to Bonfield's memo:

Funding for Year Two of the Comprehensive Compensation and Classification Study will not be funded. Market conditions will be reassessed at a later time to determine the appropriate level of funding.

Similarly, pay-for-performance merit increases won't be on the table this year, while the longevity salary boosts for long-serving employees will be reduced over the next two fiscal years before phase-out. The only funded pay increases this coming year will be those previously negotiated for police and fire.

Also changing:

• A reduction in 401(k) contributions for eligible City employees
• "Modest increases" in health care and dental premiums
• Elimination of benefits to employees working less than three-quarters time.

The other big, big change coming in this year's budget: more cutbacks for so-called non-city agencies, the non-profits that provide ancillary services and bickered their way to almost $826,000 this budget year -- down, sharply, from FY08's $1.55 million.

Coming next for non-profits: another $310k in cuts this coming year.

Last year, non-profits dominated much of the public hearing on the budget, fighting over what last year was a 47% cut. Don't expect much of a change this year, with the stakes still high for those groups that survived last year's process. (No new groups will be considered this year.)

Also changing this year, the various City funds, like those for downtown, the ballpark, transit, parking and so forth, will "not incur new costs, and will only be funded at a level to cover required costs, including debt and operating costs," according to the manager's press release.

That said, two new funds will be added: one for neighborhood economic development, and another for deferred maintenance -- two areas that have gotten significant attention from policy-makers and citizens alike.

As noted in the previously-adopted budget guidelines, the City tax rate will remain fixed at $0.54 per hundred dollars of property valuation. And while the City won't dip into its rainy-day money, last year's much-debated fund balance, the City will be leaving the fund balance at 11% of appropriations -- a figure that might be increased if there are savings in this budget year.

Additionally, no new debt will be issued this coming year -- whether this impacts voter-approved bonds or simply COPs and other city-initiated forms, we're not sure yet (and we'd assume it doesn't impact water and sewer bonds funded out of utility revenue.)

Bonfield will unveil the budget at Monday night's City Council meeting; a series of special work sessions on the budget follow on May 26-28, before a public hearing on the budget on June 1.

Comments

[Todd P]

The good: Deferred maintenance fund. It's about time Durham started paying for maintenance out of the regular revenue stream.

The bad: No new debt to be issued this year? This is the exact opposite of what should be happening. Interest rates are at historic lows. Contractors are hungry for work and bidding down prices for projects. Not to mention that the voters approved these bonds in 2005 and 2007 and it's about time to get these projects underway.

Need an example? The city's 2009 Street Repairs and Resurfacing contract (ST-234) was put out for bids to be received May 6th. The result - what Public Works thought would cost $7,044,894 came in at just $4,929,477, a savings of $2,114,523, or 30% under budget. That's the best reason to stop sitting on this bond money and put it to work.

http://www.durhamnc.gov/departments/works/project_ST-234.cfm

[Todd T]

Likewise, I think Durham is in a great position to maintain its trajectory toward greater collective prosperity if it can muster the self-confidence to continue if not increase investment in herself.

I imagine that many people and governments would take notice if Durham could put forward a responsibly bold budget that intelligently invests in its people and in infrastructure that will support its future sustainability.

I feel that Durham's short-term economic future is quite promising and very unique nationally. Let's make the most of it.

[State Treasurer]

Debt:

1. No debt issued does not mean no projects authorized, nor that projects with existing authorized debt funding will not be started and completed (like the 05 and 07 bond projects you cite).

2. The City is limited by the amount of debt it can issue by its debt to appropriations ratio. State Treasurer says 15% is too high: Durham is closing in on that. City couldn't authorize a whole lot of new debt projects even if it had the funds. Complete the remainder of the 05 and 07 bonds, or bring in more $$$ and then new projects can be considered.

3. It is bad business to chase interest rates. Debt is issued in an organized fashion. If rates drop City will do debt refunding (refinancing). As it stands Durham has refinanced all its debt that could be refunded. City has saved close to $11 million (over 20 year term life) in 5 - 6 years of intense refinancing of its debt portfolio.

[KeepDurhamDifferent!]

Agreed we should not be chasing interest rates. This is a city government, not Microsoft.

Interested to see how much money HPSD is losing in contributions from the city, as I have promised to increase my giving to them.