To rank or not to rank?

To hear Chico City Council members talk at their meeting Tuesday (Feb. 21), the city is like someone who needs to go on a diet but doesn’t know whether to put a lock on the fridge or rely on self-discipline to eat less.

It’s budget time for the city, so the council members were talking about money, not food. Specifically, they were trying to decide whether they should rank the city’s priorities in budgeting or continue with its current, more flexible “guiding principles for budget development” that simply call for “a balance between public safety, infrastructure and quality-of-life services.”

This may seem esoteric, but it could have significant effects on future spending decisions. And council members were deeply divided on which course to take.

At issue was a proposal Councilman Bob Evans made late last year that the council give first priority in the budgeting process to “replenishing” its reserves, second to restoring city staffing to comfortable levels, and third to raising salaries.

Council members discussed Evans’ proposal following a lengthy budget study session, the first of several leading up to adoption of the FY 2012-13 budget in June, and a quarterly financial report from Finance Director Jennifer Hennessey.

Despite the many hits the city’s revenue streams have taken, the budget is still balanced, Hennessey said, and in some respects things are looking up as the economy slowly improves.

She acknowledged, though, that during the recession the city has used its operational reserves to help balance the budget, and that the fund was down to about $120,000. The separate emergency reserve has $5.7 million. Historically, policy has been to keep about $3 million in the former and $9 million in the latter.

Some council members were more concerned about the reserves than others. All wanted to see them replenished, but some didn’t want to put city staff in a strait-jacket by making it a rule that money had to go into reserves first.

As Mayor Ann Schwab put it, “Do we lay people off to add to the reserve? Do we not pick up leaves or fund community-based organizations?”

Councilman Andy Holcombe thought it was a mistake to have “forced ranking.” What if the city had a chance to land a huge federal grant, he asked, but it needed to come up with $1 million in matching funds? “I might want to do that before I put money in an emergency reserve or hire more staff.”

Vice Mayor Jim Walker, in contrast, thought Holcombe was being too literal. “I don’t see how Bob’s priorities lock us into anything,” he said. In fact, they are entirely consistent with existing budget policies. “These are basic, simple, fundamental guidelines that don’t require any dollar amounts.”

For his part, Evans pointed out that the city was still reeling from loss of its RDA money. He added that the state “is in a very precarious position right now,” which makes future funding highly uncertain. The city has depleted its reserves, contrary to its own policies, and needs to replenish them.

Laughing, Councilman Scott Gruendl said he agreed with everyone, and that Holcombe had “hit the nail on the head.” At the same time, he added, “not having an operational reserve is a red flag. What happens if [Gov. Jerry Brown’s] sales tax doesn’t pass and AB 109 [the realignment bill] isn’t funded? Is the county going to charge us for use of the jail? The county could potentially run out of options.”

And so it went. Evans’ proposal hadn’t been agendized as an action item, so the council took no vote, instead putting it over to a later meeting.

The council will hold a special meeting next Tuesday, Feb. 28, at which it will hear a presentation on strategic planning and priorities by Assistant City Manager John Rucker.