Mayor’s State of the City warns of financial troubles ahead

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Richmond City Hall

Richmond’s financials are stable. The city saw growth last year in both property taxes (up $3.7 million last year) and sales taxes (up $1.9 million). Its bond rating has increased since souring in 2015. And the city enjoyed its lowest unemployment rate in history at 3.1 percent in May 2018. It’s currently at 3.4 percent.

But persistent homelessness and homicides remain a problem, and financial stability is expected to wane as a result of the rising cost of employee retirement expenses and compensation, Mayor Tom Butt reported in his State of the City address Tuesday.

“Our status quo budget still faces major increases primarily due to rising CalPERS pension and employee benefit costs,” Butt said.

In recent years, the city has enjoyed minor annual surpluses. Starting in 2021, however, the estimated deficits “will begin to wipe out our fund balances entirely” without major adjustments, Butt said.

By 2025, rising pension costs, which are impacting nearly all California cities, are expected to increase to more than half of the payroll, “putting us in the top 12 percent of cost-burdened cities in California,” Butt said.

As the city struggles to pay the bills, it will have fewer funds to pay for vital city services and also the recent voter-approved Kids First Initiative, which mandates a percentage of the city’s unrestricted general fund for youth-related programs and services.

The mayor highlighted housing and homelessness as pressing city issues. He touted the city’s ongoing move to dissolve the oft-criticized Richmond Housing Authority (RHA) as providing some relief for the city’s budget. The city is moving to transfer the RHA assets – including the Nevin Plaza and Nystrom Village housing complexes as well as the shuttered Hacienda complex — to private sector managers. The plan will transition RHA’s Section 8 program to the Contra Costa Housing Authority.

The “new model will provide the same benefits and better services without the general fund subsidy,” Butt said.

The city also faces growing homeless challenges, the mayor said, as “camps have sprung up along freeways and creeks, railroads, and even downtown.”

“Many campers suffer from substance abuse, mental health and other challenges,” he said.

The mayor said the city should be getting more county funds to provide services for the homeless. His office is working to raise $1.5 million to provide a managed encampment for both tent and RV campers. The city also has a partnership with the county on outreach services and on a project to develop 50 MicroPAD units for supportive housing, Butt said. The rehabilitation of 40 units at Las Deltas will bring additional temporary housing and comprehensive support services. The mayor also wants to incentivize production of accessory dwelling and junior dwelling units to the increase affordable housing stock.

The mayor also cited the need to remain vigilant on crime. While Richmond police continue to remove a steady stream of firearms off the streets, and while there were fewer incidents of shots fired last year, there were 18 homicides, an increase from the previous year and far too many for a city of just over 107,000, the mayor said. 2019 began with four homicides in January alone, Butt said.

The mayor’s State of the City offered plenty for the city to be proud about, as well, such as an ongoing downtown housing development boom involving the creation of 1,000 units, the developing Co Biz Richmond on the ground retail level of the BART parking garage, the growing Richmond Promise program, launched by a community benefits agreement between Chevron Richmond and the city, which has provided college scholarships and guidance for 936 high school seniors since 2014.

He also touted initiatives to address climate change such as MCE Solar One, a large solar field along Castro Street providing 7 percent of Richmond’s electrical power load, or 3,400 homes, along with the city’s electric vehicle rebate programs. Recent ordinance amendments ban the use and sale of plastic straws and stirrers in the city and requires the use of recyclable or compostable utensils and lids. Aggressive climate change actions have led to grants to do even more, the mayor said, including $2.4 million for a solar project at the Port of Richmond’s auto processing plants, which will provide power for 154 homes.

The naming of Richmond’s official bird as the Osprey, the success of the new Richmond Ferry, the opening of Unity Park and many more accomplishments were highlighted in the State of the City, which featured four very special guests of honor.

To watch the full State of the City, click here.

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