At first glance, there are no raw-meat proposals like the one made by Bill Ritter involving the possible diversion of $1.3 million to fund extra drunk-driving patrols. The most controversial notion involves the potential elimination of jobs in the police or fire departments, but Hickenlooper covers himself by putting the decision to slash or not on labor reps. As the letter states, "There will be no wage increase for police, fire and sheriff union employees, or there will be a reduction in force in those agencies to achieve the needed savings." Canny politics during an ugly fiscal time.
Look below to read the letter in its entirety, which proves that there's been no cutbacks on bullet points:
Dear Denver City Council, City employees and residents of Denver:
Our City has never experienced the kind of the economic downturn we have seen in the past year. More of our citizens are out of work and more of our businesses are failing. Sales tax revenue, which makes up half of the City's revenue stream, is projected to decrease 7.8 percent ($33.8 million) this year and total revenues are anticipated to decrease 5.6 percent ($48 million).
The 2010 budget marks the second year in a row we have had to reduce expenditures to balance the budget. To balance the budget in 2009, we cut $86 million from projected expenditures because of slowing revenues. We took numerous steps early, and even before the recession began:
• We stopped filling nonessential vacancies in May 2008 and that effort continues today. In fact, the City will have 515 fewer budgeted positions in 2010 than it did in 2002.
• We used feedback from City workers and our community to find immediate savings and efficiencies.
• We eliminated raises for Cabinet members in 2009 and cut in half the raises given to most City workers. We eliminated the bonus program for employees.
• We required Career Service employees and appointees to take four furlough days in 2009.
• We found savings through contract concessions, furloughs and a reduction in force within our safety unions (police, fire and sheriff).
These decisions helped keep the budget balanced, but revenue declines have continued. Remember, we are experiencing the worst drop in City revenue since 1933. Upon beginning to build the 2010 budget, we revised the gap between anticipated revenues and normal growth in expenditures to $120 million through the end of 2010. The cuts in the 2009 budget, combined with cuts in the 2010 budget, total $206 million.
Creating the 2010 budget presented the City with one of the most difficult financial challenges in many decades. We approached this budget process with a focus on maintaining the core services that are most critical to our citizens, while at the same time identifying sustainable savings that strengthen our ability to deliver services more efficiently and effectively.
We present to you the proposed 2010 budget for the City and County of Denver.
2010: City priorities
City operations have been organized since 2003 around five primary goals: enhanced quality of life, economic vitality and opportunity, customer service, workplace morale and fiscal responsibility. Even in these difficult financial times, we have not lost sight of these goals. In 2008, City directors and managers worked to incorporate these goals into a strategic framework focused on 10 outcome areas for the future.
The goals remain the same for 2010:
• People leading healthy and successful lives.
• Vibrant and dynamic economy.
• Availability of quality cultural and recreational opportunities for all.
• Efficient, diverse, and accessible transportation system.
• Safe communities.
• Environmental stewardship.
• High-quality customer service.
• Motivated, diverse and prepared workforce.
• Living within our means.
• Internal services that help the City achieve its goals.
We are committed to advancing these outcomes through efficient and effective methods.
2010: Closing the budget gap
Total General Fund expenditures for 2010 are projected to be $855.6 million, a decrease of 1.14 percent from our current revised 2009 operating budget and a decrease of 3.9 percent from 2008 actual expenses. To close the $120 million shortfall projected through the end of 2010, we carefully evaluated more than 900 ideas from City employees and incorporated input we received from six community meetings held throughout the City in June and from an online budget survey that attracted more than 3,700 responses.
We used $40 million of reserves to limit the budget gap to $120 million. Without using these reserves and lowering our undesignated fund balance to 11.5 percent from 15 percent, the City's budget gap would have been $160 million. We closed the $120 million gap by:
• Efficiencies and savings: $75.7 million
• Personnel savings: $23.3 million
• Revenue enhancements: $21 million
Efficiencies and savings = $75.7 million
The 2010 budget continues our effort to address the need for a more sustainable budget - that is, a budget that does not require significant change each year. We also want a budget in which residents can anticipate the level of services we can provide and employees can feel more secure in their roles and responsibilities.
More than 50 percent of the cuts we made to meet the $120 million shortfall are sustainable cuts - not one-time savings that we must again find in future budget years. Many of these efficiencies may not be significantly noticeable to our community, as they represent better ways to do business and more efficient use of resources. However, some changes will be more visible to the public. In 2010, we will:
• Reduce Denver8 TV programming to public meeting coverage and select programming.
• Reduce hours at 18 library branches and the Central library. We will also close and sell the Byers branch library.
• Work to transition four recreation centers that serve few residents (Johnson, Globeville, College View, and La Alma recreation centers) to organizations who can offer more valued services to the community.
• Reduce operating hours for 311 (this change went into effect Aug. 30, 2009).
• Reduce the size of our workforce by abolishing or holding vacant 600 positions. This could cause some service disruption, but we will do everything we can to minimize the impact.
We also reduced equipment replacement, professional services, supplies and miscellaneous expenses without compromising critical maintenance or operations to the point of increasing future costs. And we are moving toward more shared services, wherein functions such as accounting, payroll, human resources and technology services will be relocated into centralized offices.
Personnel savings = $23.3 million
Personnel costs make up 70 percent of the General Fund budget. To achieve the savings of the magnitude the City needs, there must be some impact on our workforce. In 2010:
• There will be no wage increase or bonus for Career Service employees.
• There will be no wage increase for police, fire and sheriff union employees, or there will be a reduction in force in those agencies to achieve the needed savings.
• There will be no wage increase or bonus for members of Cabinet.
• There will be five scheduled furlough days. We will evaluate when to schedule these days as the year progresses.
• The Denver Employee Retirement Program (DERP) will require a 2 percent increase in contribution to individual pension plans to maintain the positive fiscal health of the plan. This contribution will be paid by the employee. (This change brings the employee contribution in line with the average for local and national public organizations.)
• The City will maintain its existing contribution toward health care premiums. The employee contribution will increase 3.1 percent, which is far below the national average of 9 percent.
As mentioned earlier, we are abolishing or holding vacant approximately 600 positions. Even with the large number of vacancies, the City will have a reduction in force equal to 176 full-time positions to balance to the budget. The combined vacancies and reduction in force will equal 8.5 percent of the total non-uniform employee count in the 2009 budget.
The reduction in force is greater in the Department of Human Services (DHS) and Office of Economic Development (OED) because of limited state and/or federal dollars.
In 2010, DHS will bring its budget into balance and achieve what is projected to be a sustainable level of spending by implementing additional cost savings and refinancing measures, including a further reduction in workforce of approximately 83 positions. This will not reduce the number of employees directly engaged in case-carrying or revenue-generating activities.
OED receives approximately 3 percent of its annual budget from the City's general fund and 97 percent from federal and state grants. Federal funds have been declining in the past three years. In the 2009/10 program year, federal funding for OED decreased by 9 percent, requiring budget reductions of $4 million, including $1.3 million from the TANF program and $2 million from programs administered under the Colorado Department of Labor. The reduction unfortunately comes at a time when resources are needed most to address the conditions of the local economy, including employment and training services to citizens who are unemployed. While the agency has received additional resources under the American Reinvestment and Recovery Act, those funds help in the short-term but do not provide for a long-term sustainable level of service.
On Aug. 31, the City announced a retirement incentive program available to all employees covered by the Denver Employees Retirement Plan. Eligible employees must be at least 65 years old or at least 55 years old and meet the Rule of 75 - that is, their age and years of service to the City add up to at least 75.
The program includes a monthly stipend from the City of $500 for 30 months and is available to eligible employees who voluntarily separated from City service on or after July 31, 2009. This offer is significantly more generous than a retirement program the City offered employees in 2003. By spreading payments over nearly three years, the retirement incentive program should reduce the tax burden on those employees who choose to take advantage of this opportunity.
We expect the program to help the City balance the 2010 budget; in fact, it was a factor in minimizing the planned reduction in force. We will not have final numbers about the retirement impact until the end of November.
Revenue enhancements = $21 million
The City has experienced the largest decline in revenues since the 1930s. Beginning in late 2008, declines in revenue dictated that we begin revising our expenditure plans to bring them in line with declining revenues and to be prepared for the economic downturn.
We revised our 2009 revenue projections down to $817.9 million from $896.3 million, a $78 million change or 8.7 percent decline from the original 2009 budget. In past years, average revenue growth for the City would be 4 to 5 percent. In contrast, the 2009 revision represents a 5.6 percent decline from 2008 actual collections. Revenue declines have been across the board in all categories and have been the primary driver of our budget challenges. Core sales tax collected in July, the most recent month available, was down 12.2 percent over July 2008 - marking the 10th straight month of decline when compared to 2008 collections.
2010 overall General Fund revenues are projected to be $851.9 million, a decrease of 1.6 percent from 2008 actual revenues, but an increase of 4.1 percent from the revised 2009 projections. A significant portion of the revenue growth is the result of revenue enhancements such as utilizing anticipated jail capacity to house other jurisdiction's inmates or better aligning City fees to cover associated costs and adjusting fines where appropriate. Other revenue changes in 2010 include:
• Elimination of the 0.5 percent vendor's incentive fee for timely filing of sales and lodger's tax returns.
• Increase certain tax registration fees and implement a new biannual registration fee for the occupational privilege tax registration to cover the costs of collecting those taxes.
• Implement a Web record search fee for organizations seeking information pertaining to case history.
• Increase fines for vehicle registration violations. Without these revenue enhancements and others, 2010 overall revenues would grow only 1.5 percent. Sales tax revenues for 2010 are projected to grow 4.3 percent from the revised 2009 forecast. This projected growth rate is consistent with other state and local projections for 2010.
2010: Use of reserves
We used $40 million of the City's reserves, also known as undesignated fund balance, to keep the budget shortfall at $120 million and help create a balanced budget.
In managing our fiscal priorities, we place significant value on the maintenance of cash reserves sufficient to maintain core services during economic downturns. We will reduce our reserves in 2010 from the typical 15 percent of expenditures to 11.5 percent to minimize service impact during this severe economic downturn. The move is consistent with guidelines approved by the Blue Ribbon Task Force on Financial Management and with the City's established reserve policy.
As we have done in the past, we will focus on reaching 15 percent of expenditures as soon as the economy allows. Consistently applying our reserve policy has enabled to the City to both maintain its credit rating and diminish the effect of significant financial downturns. By continuing to respect our reserve policy, we are prudently managing our financial capacity and protecting our operations from significant disruption.
2010: Looking to the future
No one knows when the economic conditions in our City or elsewhere in the nation will improve. But we can say one thing with confidence: The people of this region have the capacity, the skills and the spirit to reduce the pain of this recession and find unexpected opportunity in tough times. We must, and we will live within our means and continue to tackle our challenges together.
There are many people who contributed to creating the 2010 budget. Most of all, we want to thank our employees for continuing to do more with less and providing outstanding service to our community, and our residents for helping us in the budget process and understanding the challenges we face. Our focus has been and will continue to be on using taxpayer dollars as efficiently as possible.
Mayor John W. Hickenlooper