Ongoing Deficit Impacts City Services

During the May 12th City Council meeting city staff revealed that, despite balancing the budget for the coming year, future years will see ballooning deficits up to $13,000,000 by 2030. Even assuming continued use of Measure C funding, an increased Utility User's Tax (UUT), and the passage of the new Business License Tax, the city will need to make big changes to balance future budgets. The city will pursue future grant opportunities, but admitted that without a change in economic conditions to boost tax revenue, more cost-saving measures will be needed.

The looming deficit will further affect city services that were already stretched thin to balance this year's budget. City Manager Jennifer Ott revealed that the entire city workforce has been reduced by 15% in the past year. This has resulted in reduced library hours, slower maintenance service response times, and major shifts in the Community Services Division. Despite cuts to the Police Department, crime has fallen year over year by over 10%.

How Did This Happen?

We've covered why the city found itself in a bad budget situation before, but very briefly the City of Hayward is facing a combination of factors that contributed to the deficit, many of which were self-inflicted. City staff were not following best financial practices, the City Council agreed to generous raises for labor unions that it turned out were unsustainable, and revenues—especially in sales and property taxes—were either growing slowly or actively shrinking. "That, essentially, I believe is our structural deficit going forward," City Manager Ott said during the meeting, "about $30,000,000, so that persists."

However, City Manager Ott pointed out that at least six other Bay Area cities were facing deficits of between 5% and 16% of their budget, due in part to slow growth in tax revenue because of the stagnating economy.

The city was able to balance the budget this year by reducing the workforce by 15%, using one-time funding from Measure C and the OPEB Trust, and concessions from labor unions to temporarily undo some of the raises and lower overtime costs. Unfortunately, the deferrals expire in 2028 which brings the deficit roaring back to over $41,000,000. If revenue growth had continued at 4% things may have balanced out by 2030, but that isn't likely in this economy.

How Are They Fixing It?

In order to balance next year's budget (FY27), the city plans to keep following the same playbook: No new hiring, keep using one-time funding, and be happy the union concessions last. But by FY28, that won't be enough once the concessions expire. Even assuming the new Business License Tax passes and generates an additional $11,000,000, and assuming the Utility User's Tax can be applied to streaming services and new data centers to generate $4,700,000, and using the one-time money for another $13,000,000, there will still be a $7,000,000 deficit to contend with.

The city may get additional grants to help offset some costs, like for fire-suppression or homelessness services or tree planting, but it likely won't be enough. On top of that, many on City Council want to stop relying on Measure C so that it can be used for infrastructure like it was intended. This led Councilmember George Syrop to consider a union-backed proposal to increase the Business License Tax even further on certain high-earning industries. However, Councilmembers Ray Bonilla, Angela Andrews, and Mayor Mark Salinas worried about chasing away businesses with too many taxes.

Public Safety Feeling Squeezed, But Surviving

Police Chief Bryan Matthews said that the Police Department has 27 sworn officer vacancies and is expecting to have more from retirements and separations. Despite continuous recruitment efforts, the vacancies persist. This is delaying promotions and is being used by the Chief as a reason to request more technology and surveillance.

Despite the officer shortage, crime in the city fell by over 10% overall in the last year. Chief Matthews attributed this to Automated License Plate Readers (ALPRS)—some of which are Flock cameras—and what he called "appropriate prosecution."

In the coming year, they plan to cut jail hours and repurpose the Community Service Officers (CSOs) assigned there, enforce parking Downtown and along Tennyson Road—generating up to $800,000 per year, and starting a Drone as First Responder (DFR) program.

Council was supportive of the technology solutions like DFR and ALPRs, primarily because of the cost-savings. Others expressed concern about how the parking enforcement was rolled out, especially how it may impact people who live downtown.

Fire Chief Ryan Hamre said the Fire Department was also suffering under staff reductions, and that it is mostly impacting specialized training, fire prevention, and community education work. They are also having issues recruiting to fill positions, which is impacting succession planning, but are still able to do their core work.

Councilmembers Julie Roche and Angela Andrews were concerned about increased call volumes, especially what Chief Hamre called "simultaneous call demands" in Downtown, attempting to lay blame on REGIS Village. However Chief Hamre said that Downtown has multiple elder care facilities as well, all of which have high call volumes. Councilmember Andrews continued her call for Alameda County and the State to reimburse Hayward for increased call volumes at REGIS Village.

Other Departments Doing Less Well

Personnel loss in Maintenance Services will result in increased response times, doubling the window for street cleanup calls to between 72-96 hours. They will plant fewer trees and focus their maintenance on the Public Safety fleet as opposed to other city vehicles.

Development Services, which handles permitting and code enforcement among others, has seen multiple management level positions vacated in the last year which is causing issues. However, they may be able to hire additional Code Enforcement and Building Official positions since they are between 75% and 100% cost-recovery positions.

The Library has suffered a number of funding reduction, including the loss of Hayward Promise Neighborhood (HPN) funds, English as a Second Language (ESL) funding from the State Library, and others which resulted in over $580,000 per year in cuts. This has resulted in reduced library hours, staffing shortages in the Makerspace, the loss of Hoopla and Kanopy, and the discontinuation of the bookmobiles.

Many on City Council expressed a desire to get the bookmobiles running again, pressing Library Director Jayanti Addleman to come up with a cost figure of at least $60,000 per year to restart the program. However, she stressed multiple times that this would only cover staffing, not other associated costs.

Another hard-hit division is the Community Services Division, which lives under the City Manager's Office. City Manager Ott explained that the loss of multiple staff, including the Community Services Manager, is forcing the Division to partner with the Youth and Family Services Bureau to handle the work. City Manager Ott said there may be a reorganization of the Division in the near future to streamline the work.

The Community Services Division was already suffering under the loss of Community Agency Funding, all of which was used this last year to support city programs and offset the deficit. In previous years, it has been used to fund local nonprofits throughout the city that help with a number of initiatives from economic development to homelessness to arts and music programming.