Concord's Fiscal Stability Efforts
Unprecedented Challenges
Despite 11 years of national economic recovery, cities across California continue to grapple with operating costs outpacing revenues -- particularly with road maintenance and state-mandated costs, and now the economic impacts of the COVID-19 pandemic. Consumer spending habits are changing causing a decline in sales tax revenues; CalPERS returns have fallen short of expectations, leaving cities on the hook for increased pension costs; and the state of California has not replaced the funds it took away from local governments when it needed to balance its budget.
In the sections below, you can learn more about how the deficit is expected to grow over time, what's causing the gap and the options the City has for addressing the funding shortfall.
If you would like to view an in-depth presentation on this issue, please watch this video featuring City Manager Valerie Barone. It was recorded at a community meeting hosted on Oct. 10, 2019 at the Concord Senior Center.
We also encourage you to share your feedback and tell us how you think Concord should prioritize its funding for the future.
Financial Forecast
The following information was presented to City Council on February 25, 2020 as part of the City's Mid-Year Update.
Based on projections, by the Fiscal Year 2030-31, the City of Concord will be facing a $47 million deficit. While the City's older forecasting model did not include the City's unfunded needs, such as roads, building and park maintenance, the new 20-year model incorporates all of Concord's unfunded needs, including desperately needed road maintenance. This forecast also assumes the March 2025 expiration of the voter-approved half-cent sales tax known as Measure Q.
What's Causing the Gap?
While many other cities are hit hardest by growing pension costs, the biggest factor contributing to our projected deficit is the deferred maintenance of our roads, buildings and parks. While the City currently spends about $6 million per year on road maintenance, a recent study showed that Concord should be spending $26 million per year just to keep the roads in the same condition they are in now.
COVID-19 Budget Update
On June 9, 2020, The City Council held a study session on the proposed adjustments to the City’s FYs 2019-20 and 2020-21 Operating Budgets. Council adopted the proposed adjustments at the public hearing held on June 23, 2020.
The City was facing significant financial challenges before the COVID-19 pandemic hit. These challenges have substantially increased since the start of the pandemic as the City recognizes the fiscal impacts of the COVID-19 shelter-in-place order. From a financial perspective, the pandemic has abruptly halted many of the City’s major revenue sources, including sales, hotel, and business licenses taxes as well as recreation program fees.
General Fund regular revenues are anticipated to fall $13 million short and the voter approved local Measure Q revenues are anticipated to fall $1.6 million short in Fiscal Year 2020-21. In anticipation of significantly decreased revenues, staff took steps to help mitigate the expected revenue losses by significantly cutting operating expenditures, including eliminating or freezing 36 Full-time equivalent positions. Through the various reductions, the City is able to achieve Council’s reserve target of 20% at the end of FY 2020-21.
Staff prepared the revised budget estimates based on the information available at the time. If necessary, staff will return to Council this fall with updated projections. Additionally, the City’s long-range forecast will be updated as part of the Biennial budget process that will take place in the Spring of 2021.
For the most current budget information, please read the City Manager's memo to Council. We also invite you to drill into the budget using the OpenGov transparency tool.
Road Conditions
Senior Engineer Joe Ririe of Pavement Engineering, Inc., made a comprehensive presentation to the Concord City Council on Feb. 26, 2019 to describe how and why pavement deteriorates at different rates, and why the City should focus on "critical-point management" to stretch its dollars. Mr. Ririe also described why pavement construction costs so much more in 2019 than it did in 2014.
Concord maintains more than 60 million square feet of pavement (approximately 311 centerline miles), and the systemwide average for its Pavement Condition Index (PCI) is a 59, or "fair." Without more investment, our roads will continue to deteriorate.
Concord Naval Weapons Station
The reuse of the inland area (approx. 5,000 acres) of the former Concord Naval Weapons Station represents a significant opportunity for Concord and for the region to grow and provide long-lasting benefits. While the City has been working on the base reuse project in coordination with the U.S. Navy since 2006, this is a multi-year process and the City has not yet taken possession of the property.
Over the last decade, the City has sought community input and created a detailed reuse plan for the first 500 acres. However, while the City anticipates that the first parcel of land will be conveyed to Concord from the Navy in the not-too-distant future, it will still be many years before construction begins.
Therefore, the base reuse project is not expected to generate revenue for many years, and any revenue generated from this development must, by law, be reinvested into the property. That means that any financial benefit that results from the reuse project will not dramatically change the City's financial situation over the next 10+ years.
To learn more about the project, please visit www.concordreuseproject.org/.
Tough Decisions Ahead
Unlike the federal government and the state, cities have limited options available to balance the budget. We can:
- Reduce services / reduce staffing
- Reduce costs / change service delivery methods
- Increase revenues / consider new fees & taxes
The City Council has noted that Concord faces a growing deficit that must be addressed through a balanced approach that will preserve the essential services the community expects and deserves. Beginning in October 2019, City staff and councilmembers have been reaching out to the community to engage residents about the City's financial challenges and solicit feedback on community priorities.
There are several ways to engage in this conversation online or in person. If you would like to receive direct email notifications about these opportunities, please subscribe to our "Budget & Finance" alerts at www.cityofconcord.org/notifyme.