City Manager Blueprints Plan to Get Rohnert Park Out of the Red

Over the course of seven years, Rohnert Park City Manager Gabe Gonzalez turned the city of Mendota — an agricultural hub in the Central Valley with a population of about 10,000 — from a place plagued with a grim economic outlook, a severe structural deficit and skyrocketing unemployment into a burgeoning place to live and work.

Gonzalez, who was hired as Mendota’s city manager in 2004, faced a $300,000 deficit in a city that operates on a $1.7 million operating budget. When he left for Rohnert Park in August, the city was operating on a surplus, said Robert Silva, Mendota’s mayor.

“We were on the brink of financial disaster when Gabe came here,” Silva said. “Now, we’re one of the few cities in Fresno County with a healthy financial reserve.”

Silva praised Gonzalez for fighting hard for Mendota. He said Gonzalez balanced the budget in the first year, established a new police department in the city after 14 years, he attracted new businesses to town, built new housing and infrastructure for a growing population, lobbied the state and federal government for equitable water distribution and secured grants to remodel one of the city’s biggest parks.

“Gabe worked really hard for us to get us where we are today,” Silva said. “He’s really good at crunching numbers and getting things done.”

Now, Gonzalez wants to do the same thing here. He’s the first to acknowledge that getting Rohnert Park out of the red is a much bigger feat than Mendota. Here, he confronts a growing 42 percent commercial vacancy rate, falling residential property values and sales tax revenues, a declining population, crumbling infrastructure and an unprecedented structural deficit.

Rohnert Park’s staggering budget problems came into sharp focus last week, at the first of three city budget workshops put together by Gonzalez. Previous budget deficits have that have been widely reported over the last year — estimated to be between $1 million and $2.4 million, in reality, are much higher, Gonzalez said.

Today, the annual structural deficit is $36.5 million, Gonzalez reported — money that the city should be putting away to pay for core services, retiree medical benefits, funding capital projects, maintaining city facilities and roads, and funding reserves for the future, in areas such as sewer and water.

A dead calm washed over the City Council when they heard the figure.

“This absolutely opens our eyes to what the full picture is,” said Mayor Gina Belforte. “I think that this will start a new precedent in terms of how we look at our budget.”

It remains unclear how the city’s going to close the budget gap — significant cuts have already been made to crucial city services and staff and last year voters OK’d a half-cent sales tax increase. Over the last two and a half years, 38 positions have been eliminated, leaving a staff of 153 and spending has been reduced by about $7 million. In addition, furloughs have been ordered, Spreckels Performing Arts Center was repositioned as a rental-only facility, pools have been shuttered and repairs to city facilities have been put off for decades.

“Almost every building in Rohnert Park needs repairs that have built up over time,” said Guy Miller, the city’s recreation services manager. “The  and  roofs leak, is literally rotting, there’s dry rot in the locker rooms at the sports center … there are about a $1.5 million in repairs that need to be done that we keep putting off.”

But the first step in solving the complex problem is reporting the true fiscal condition of the city, Gonzalez said. The total structural deficit comes to $335.9 million, he said. That includes paying for unfunded liabilities such as retiree medical benefits and an annual $2.9 million operating budget deficit, or money that should be getting set aside for day-to-day operations and basic governmental services, such as police and fire and parks maintenance.

It's not that the city has never set money aside for retiree medical — it has. The problem is that it just hasn't been enough. The current pricetag for retiree medical unfunded liabilities is a whopping $53.2 million, and about $2.6 million has been set aside to date. 

Meanwhile, the pool of retirees is growing, and they're living longer. Compounding the financial woes, sales tax revenues have fallen about $1.6 million since 2007 and property taxes have dropped $600,000 since 2008.

"The list of our problems and issues is long, but they are not unique," Gonzalez said.

The burst of the housing bubble in 2007, coupled with the onset of the Great Recession in 2008 and the dramatic reduction in sales tax revenues and other revenues have mushroomed the financial catastrophe.

“We didn’t get here overnight,” said Gonzalez, who was has a Master’s Degree in public administration from Fresno State University. “It could take five, 10, 15 years to take care of this, but I think we can do it."

“As city manager, my role during the budget process is to inform the City Council and residents of Rohnert Park’s on the city’s financial condition, whether it’s good, bad or ugly news,” Gonzalez said in a statement. “Candidly, the news I have to deliver is ugly.”

Even though  that promise to bring a new crop of young people to the city, the Green Music Center is expected to draw record crowds to Rohnert Park and commercial developments are in the works — all of which could bring revenues up, Gonzalez said he can’t factor that into this year’s budget.

“For too long the city’s has relied on one-time monies and projections to balance the budget,” he said.

“Several cities have gotten into trouble by using creative financing — that is, making deficits disappear by hiding the facts and deferring problems,” said Alan Auerbach, a budget expert with the Public Policy Institute of California. “It’s a very common problem; it’s a result of weak politicians giving inaccurate information. Rohnert Park is in no way unique."

"Now they’re being hit by exploding deficits," Auerbach said.

Gonzalez aims to change that course.

Over the last year, he has initiated ways to get Rohnert Park out of the red. They include a mix of lofty and contentious ideas.

He’s been under political fire for two proposals he’s set into action: and .

Gonzalez said he’s looking at the cost of everything, and he has to examine the Public Safety Department because it takes up 54.2 percent of the $28.5 million operating budget.

The influential Rohnert Park Public Safety Officer’s Association publicly criticized him, saying the proposal to contract law enforcement to the county goes against promises made during the campaign that got Measure E passed.

“It was because of us that Measure E passed,” said Dave Welch, a spokesperson for the police union. “We went into Measure E with good faith after being assured by the council that the funds would stay in Rohnert Park … if the city starts contracting out law enforcement, tax payer dollars will go to the county.”

Gonzalez has received three offers from the Sheriff's Department that would cut the city's cost from $15.5 million dollars annually to $9.2, $10.2 and $11.3.

And, after three years of political banter between the city and a handful of outspoken Rohnert Park residents, since Measure L passed in November 2008, the City Council last week OK’d a sewer fee rate hike, set to go up 25 percent this July, 25 percent again in January 2012 and an additional three percent per year for the following three years.

Under the new structure, a single-family home will likely see rates jump to $58.65 by January, from $37.58 today.

Gonzalez has also adopted an economic development plan, under which .

Over the last year, the City Council has passed four pieces of legislation that eliminated or altered fees developers are required to pay. They include: a commercial rehabilitation loan program, where the city can choose to subsidize a loan though the redevelopment agency for a developer who wants to renovate dilapidated shopping centers and blighted commercial strips; the City Council rescinded the public art fee and the affordable housing linkage fee, and amended the municipal code to allow developers to pay sewer capacity charges over time instead of all at once, on a case-by-case basis.

And last week, Gonzalez outlined a new plan to set aside money in reserve funds, that the city has a history of taking money out of to balance the general fund.

"We’re borrowing from accounts that we should be putting money in to," he said.

The city currently has a cash balance of about $3.9 million on hand for emergencies and operating capital, according to Finance Director Sandy Lipitz. But in order to fund the city in the long-term, monies should be getting set aside annually to pay for the growing pool of retired public safety officers and infrastructure projects.

“We had healthy reserves from 2005 to 2008, but since the economic crisis hit, we’ve been using reserves to balance our budget,” Lipitz said.

The plan Gonzalez introduced last week to set aside money in reserves annually would only be able to be taken out to pay for disasters, state budget takeaways, economic downturns and large, unexpected costs. Even then, he said, it would take a 4/5 council vote to use the funds. Lipitz said by the end of the year, the city plans to set up a trust fund to put the retiree medical into, which will accrue interest.

Gonzalez’s financial background was seen as a boon to the council when they hired him last summer. Before Mendota, he was the finance director for the city of Arvin, just south of Bakersfield, Calif. from 1995 to 2001.

Though they agreed Tuesday that the city should start setting money aside for the future, the question about where the money is going to come from remains.

“So, you’re saying we’ve been putting a Band-Aid everything ... but I still would like to see where this money is going to come from,” said councilmember Joe Callinan.

“This is not just Rohnert Park’s problem, it’s endemic — it’s happening everywhere,” said Vice Mayor Jake Mackenzie. “Everybody’s going to be grappling with this, we’re just doing it sooner rather than later.”

“No one’s saying we’re going to be able to put all this money aside, but if we don’t do something now, then we’re just going to continue to exascerbate our problem,” Belforte said.

Editor's note: Significant facts and figures have been omitted from this report in attempt to maintain some sort of brevity for readers. Rohnert Park Patch will continue to follow the city's ongoing budget workshop meetings, set to unfold over the next few weeks. The next meeting is scheduled for 10 a.m. Tuesday, May 24 at City Hall. The City Council is expected to approve the proposed 2011-12 budget at the end of June.