Workshop paints picture of 2021 budget

By Per Peterson

The Tracy City Council on Monday tested the waters on a preliminary 3% levy increase during a budget workshop presentation by Tracy City Administrator Erik Hansen.

Working on his first city budget since arriving in Tracy in March, Hansen laid out what he called a simplified, zero-based budget plan for 2021 that includes just 15 line items, compared to 38 a year ago — a 40% decrease.

The final preliminary levy must be approved by the end of the month, and the final budget in December. The preliminary levy can be lowered before that, but cannot be raised.

“How this works is easier when it comes to spending money,” Hansen told the council. “We can simplify the budget and still address priorities with our new financial system. Each fund should be operating on their own for the most part. A budget is a snapshot in time for now, but you’ve gotta think about the future, so you can plan for the present.”

The 3% increase equates to $1,247,558; it would be the second straight year a 3% levy increase is adopted. However, because of the financial situation the City finds itself in, that likely won’t be the only increase in 2021.

Other proposals to increase revenue to the City to lower its debt service include a 3% increase in water, sewer and solid waste fees, and an increase from $.25 to $1 per month on the solid waste management fee. Another possibility would be a flat, $5 debt service fee on what has turned out to be one of the biggest sources of concern for the upcoming years: water utility.

Hansen said there are issues surrounding the water utility portion of the City’s overall budget, as he is projecting a $53,264 loss in the fund balance to cover debt service. The use of the fund balance for debt service, he said, is not sustainable and will cause the projected end-of-year fund balance to dip to more than $583 below the needed one-year expense reserve.

The best options for closing the gap are increases in rates or additional fees; Hansen doesn’t recommend using general taxes for this purpose.

Hansen said the most important strategic issue the Council is facing is how to handle its debt service. He said Tracy is more leveraged than most cities its size.

“Compared to other Class 4 cities, we have seven times more capital debt,” he said. “And it’s because of the street project.”

See this week’s Headlight Herald for more on this article.