Pension costs, aging infrastructure negatively impacting Nevada City budget
June 14, 2018
Despite a "very conservative" draft prepared by its city manager, Nevada City is looking at a fiscal year 2018-19 budget that is not balanced.
That is due in part to the wastewater fund and an aging water and wastewater infrastructure, said City Manager Catrina Olson during Wednesday's city council meeting.
And looking ahead, Nevada City will have an enormous financial burden it needs to take into consideration. The city faces significant increases in its contribution to pensions because CalPERS, the state Public Employees' Retirement System, has changed the way it calculates those costs.
According to Olson's report, Measure L — which went into effect in 2013 and sunsets this year — was fundamental in improving and repairing infrastructure associated with deferred maintenance experienced during the recession, helped restore full-time city management positions, and has enabled the city to set up General Fund reserves.
Increased staffing needs at the fire department, with three new firefighters this last fiscal year, created a significant funding challenge, Olson wrote. The city was forced to keep a vacancy open for two years and redirected $180,000 in Measure L funds from other projects such as the Pioneer Park Pool rehabilitation. But, said Olson, the passage of Measure C in 2016 provided funding for these positions and an additional police officer into perpetuity.
Nevada City's newest tax, on cannabis businesses, is estimated to bring in $115,000 in fiscal year 2018-19, according to Olson's budget.
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"I did go very conservative on what I put in the budget until we see how it performs," she told the council.
Olson added that in a discussion with the city of Santa Cruz, its assistant city manager told her their revenue so far from cannabis had been "underwhelming."
Those Measure L-funded reserves are helping Nevada City deal with its increased pension costs, Olson said, adding that Nevada City began allocating those reserves during fiscal year 2013-14 with $175,000 in reserves by the end of fiscal year 2018-19.
The city's current unfunded obligation is approximately $4 million as of June 30, 2017, Olson wrote, adding that the city's contribution rates will increase dramatically in 2018-19.
Pension costs are having a "huge impact" statewide, Olson told the council.
According to Olson, Nevada City's water revenue has decreased because of its customers' conservation efforts — an average 25 percent drop since 2013.
Major capital improvements are needed in the distribution system, Olson said. There are minor approved rate increases, but potential increases likely will be needed for operational costs and necessary infrastructure improvements.
The wastewater fund has been in a deficit for three or four years, Olson told the city council, with $296,000 more expenditures than revenue for fiscal year 2018-19.
The city council and city staff know that it is confronted with aged infrastructure in both the water and wastewater operations, Olson wrote in her report. A conditions assessment has been performed and will be presented to the council, and city staff will bring forward a capital improvement plan based on this assessment.
Contact reporter Liz Kellar at 530-477-4236 or by email at firstname.lastname@example.org.