One in four City Hall workers could lose their jobs next
week.
Wrapping up weeks of late nights and tough decisions, City
Administrator Tom Haglund presented two basic options to council
members Friday evening.
One in four City Hall workers could lose their jobs next week.
Wrapping up weeks of late nights and tough decisions, City Administrator Tom Haglund presented two basic options to council members Friday evening. The first envisions cutting 44 of the city’s 277 full-time jobs, which would save $3.3 million this year and $6.7 million next fiscal year, but would still leave Gilroy with a $2.8 million deficit this year, according to city figures. This first scenario entails cutting infrastructure improvements as well as jobs, while the second recommendation leaves major projects in tact while cutting 64 full-time jobs – including three police officers – which would save $2.8 million this year and a $8.2 million next year, according to city figures.
Council members will consider the cost-cutting plans at a special meeting Wednesday evening. If the body approves layoffs, employees will have 30 days to clear their desks. If an employee has seniority, he or she will have 10 days to decide whether to “bump” a subordinate, who will then have 30 days thereafter.
“As you can see this is very complicated and distressing to the employees,” Human Resources Director LeeAnn McPhillips wrote in an e-mail Friday.
Haglund agreed.
“Unfortunately and regrettably, layoffs represent the single largest category by which these expenditures can be reduced on an ongoing basis,” he wrote in an e-mail to council members Friday evening.
Assistant City Administrator Anna Jatczak took part in the layoff decision, of which she will be a casualty.
“I need a job as much as anyone else, but after looking at the overall health of our city – it’s a tough decision,” Jatczak said. “It was harder to have to tell those lower than me than to receive the news myself.”
While she is a part time employee who cannot work overtime and does not collect benefits – nearly all 57 of whom will receive 30-day notices – Community Service Officer Angela Locke-Paddon has also found herself on the chopping block after 17 tears with the police department. Recently she has led the city’s graffiti abatement program, which has resulted in dozens of arrests while rallying an equal number of residents to watch for and paint over vandalism.
“Everything’s happened so fast,” Locke-Paddon said from her home Friday as her 7-year-old daughter played loudly in the background. “The council really needs to think about this … They won’t be saving a lot, but they’ll be losing a lot.”
Haglund – who came to the city in spring form Hanford and almost immediately had to cut $4.5 million from the current budget – also recognized the burden of balancing a budget with high public safety expectations at hand.
“A day of reckoning marches steadily forward in which the funding levels of the non-safety services will be in ever increasing conflict with the funding desired for safety services,” Haglund wrote in his report.
Thanks to lower-than-expected revenues and shrinking sales and property tax receipts, this year’s general fund deficit is on path to grow from the $3.9 million the council approved to nearly $6 million by June 30, 2009, when the current fiscal year ends. The council passed this year’s budget expecting a $3.5 million deficit next fiscal year, but that number now appears closer to $7 million, according to Haglund. Both layoff plans would cover next year’s deficit, according to city projections.
As far as other options, salary reductions or furloughs would only have worked had wage reductions been to the tune of 20 to 25 percent for each employee, according to Haglund, which would require intense negotiations.
Still, other cost-cutting options include reducing staffing at fire stations to minimum levels or eliminating fee waivers for developers, which cost the general fund $1.6 million a year. And the city could also increase revenue by raising facility use fees or – granted on a one-time basis – by selling city property. There’s also the idea of teaming up with Morgan Hill or Hollister for planning and building services, Haglund wrote.
Earlier this month the body voted 6-0 to buy back $42.7 million worth of auction rate notes it issued in 2003. Councilman Perry Woodward was absent. The $42.7 million figure represents the amount Gilroy still owes investors after issuing nearly $46 million worth of notes in 2003 to fund the construction of the Sunrise Fire Station, the new police station, the sports complex and improvements at the corporation yard. The city had the cash for the projects back then, but rather than spend its own money, it opted to externally finance the projects and pay a lower interest rate to investors than it expected to earn on investing its un-spent reserves in securities and federal bonds.
The gamble – which netted the city more than $600,000 – panned out until a few weeks ago, when interest rates on the notes shot up as jittery investors could not sell them and were required to keep them, triggering automatically higher interest rates based on a weekly index. Gilroy only has $152,000 per month budgeted for the interest payments on its notes, which anticipates an annual rate of about 4 percent, but the weekly rates shot up from about 3 percent to nearly 12 percent, and now hover around 8 percent, according to Craig Hill, the city’s financial adviser who works for San Rafael-based Northcross, Hill & Ach.
The roughly $43 million will come from the city’s water and sewer funds, which have about $39 million in them. There’s another $4.2 million in another sewer fund, and finance officials plan to pool about $39.8 million from these three sources and then take another $500,000 from a separate debt fund and the remaining $2.4 million from the general fund reserves.
Buying back the city’s notes will cut the general fund reserves from $16.6 million to $14.2 million – down from $26 million a year ago – and it will also lower Gilroy’s investment portfolio balance from $60.7 million to $17.3 million.
“I’m mad that the city’s finances weren’t managed better. These are peoples’ lives. It’s a horrible feeling,” Locke-Paddon said. “It’s really hard to think about moving on. That’s my second family there.”
Download the entire staff reduction report, complete with specific department reductions.
