DATE: May 31, 2022
DEPARTMENT: OFFICE OF THE CITY MANAGER
FROM: ANDREW MYRICK, SR ECONOMIC DEVLOPMENT MANAGER
TITLE: SALINAS PLAN “REFRESH”
RECOMMENDED MOTION:
No formal action is required; however, feedback from the Committee Members is welcome.
DISCUSSION:
Background
On December 4, 2018, the National Resource Network (NRN) presented the Salinas Plan to the City Council. The Salinas Plan is a comprehensive review of City finances and operations that utilizes a ten-year budget model to identify the fiscal challenges facing the City; specifically, the model found that the City has an ongoing structural budget deficit, meaning that expenditures are increasing faster than revenues (see chart below).
Absent corrective action, the City would see increasing deficits, eventually exceeding $10 million per year by FY27 and $60 million total over the next ten years. Under this projection, the City would exhaust its reserves by FY23. Further, this projection assumes no additional investment by the City to help address the housing affordability crisis the City is now facing. On its current path, the City faces the steady erosion of existing services, with no additional resources available to address the housing crisis or other challenges that may arise.
To prevent this outcome, the Salinas Plan includes a list of 32 recommended initiatives that, taken together, would enable the City to maintain its fiscal solvency, core services, and strategic priorities as well as identify additional resources to address the housing crisis. These initiatives achieve this through a variety of methods, including reducing or eliminating non-core services; identifying new revenues to fund key strategic priorities; and finding efficiencies in operations to enable the City to continue to deliver key services at a lower cost. The recommendations span nearly all City Departments and entail sacrifices by employees, residents, and businesses – however, if completely implemented, the Salinas Plan projects that the City should be able to maintain core services, increase efficiencies, implement new and expanded initiatives to address the housing crisis, and do so over the long-term by implementing fiscally sustainable practices.
Current Status
It has now been over four years since the Salinas Plan was originally presented. During that time, City staff has been diligently exploring many of the recommendations of the Salians Plan, and the Council and City staff have taken actions to partially or fully implement several of the recommendations. Work on the recommendations continues to proceed (please see the attached table for updates) – however, the usefulness of the Salinas Plan as a guiding document is decreasing, due to the following circumstances:
The COVID pandemic has created dramatic changes in the overall economy, which decreases the reliability of the financial models used to project the City’s revenues and expenditures.
Some items in the Salinas Plan have been found to be infeasible or have only been implemented in part. This means that the projected savings will not be realized from those items and may need to be found from another source.
Financial models by their nature are less reliable over the long term – periodically reviewing and updating these models with the most current information is generally considered to be good practice.
Based on this, staff has recommended that a “Refresh” of the Salinas Plan be conducted. This Refresh would build on the work previously done, but would also do the following:
Update the fiscal projections, looking at the most recently available economic data, to create a more accurate fiscal model and identify projected budget shortfalls.
Reexamine the proposed recommendations. Recommendations that have been completed or rejected should be removed, and new recommendations generated to close any structural budget deficit.
Remove sections related exclusively to housing, thereby giving the document a singular focus on the City’s structural budget deficit.
The original Salinas Plan cost $400,000 to prepare – of this, the City paid $100,000, and the remaining $300,000 was covered by the National Resource Network. The Refresh is not expected to take as much time and resources; however, it also would be the City’s responsibility to pay for all of it. Staff believes that this effort will likely cost at least $125,000 over the upcoming fiscal year, and is preparing to include funding for this in the upcoming FY23 budget. Upon approval of the funding in the budget, staff would initiate and circulate an RFP to identify potential vendors who could do this work.
FISCAL AND SUSTAINABILITY IMPACT:
As noted above, staff is proposing $125,000 in the FY23 budget to cover the costs of the Salinas Plan.
ATTACHMENTS:
List and Status of Salinas Plan Recommendations
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