The economic impacts of the COVID-19 pandemic has been felt throughout the world. The City of Napa has not been immune to these impacts. The budget shortfall the organization is facing is significant and immediate action is needed to ensure the continuity of core services for our community and mitigate the impacts to our employees. In April, the Council directed staff to close a projected $10 million revenue shortfall for Fiscal Year 2019/20 with reserves, elimination of capital projects and reductions in operating expenses in every department.
To mitigate a projected $20 million revenue shortfall in Fiscal Year 2020/21 representing a nearly 20% decline in overall revenues, Council has heard staff recommendations outlining potential near-term and long-term solutions to address the budget issues, which have included the use of emergency reserves, additional cuts to capital projects, reductions in operating budgets all departments, the freezing of unfilled positions and unfortunately, potential layoffs.
Employee costs make up about 75% of the City’s budget and the City Council has directed the administration to work with employee unions to attempt to negotiate salary and benefit concessions that could help offset potential layoffs, either fully or in part. While the employee costs make up 75% ($75 million) of the City budget, City administration recommendations were guided by a belief that employees are the heart of service delivery to the community. The request to current employees was limited to requesting about $4 M. This amounts to about 20% of the total revenue shortfall projected due to COVID-19.
The City has an urgent need to make decisions now that are smart for the future of the entire City, so that it remains financially stable for years to come. Delaying these decisions would mean that when cuts are needed there would likely be more severe impacts to our community services. For this reason, City administration has proposed a balance use of one-time and ongoing reductions and protect some reserves for future needs.
In order to demonstrate the commitment to working with employee unions to limit the impacts to employees, at the most recent City Council meeting, the Council directed the City Manager to delay layoff notices until May 29th to allow for further discussions with our employee groups.
The city is in closed contracts with all of our labor unions which means the only managerial decision that can be imposed is layoffs. The City cannot impose furloughs, pay cuts, or raise deferrals; the City has to negotiate those concessions. Since late March, City administration has engaged with every union, meeting more than 30 times sharing city budget information, fiscal projections and discussing ways that they may be able to contribute to the solution the community needs.
At this time, most of our employee groups have offered constructive, creative concessions to help mitigate budget impacts, and these concessions will be used to offset the need for layoffs. The City Manager has reduced his compensation package by over 10% and the Executive Team has followed that lead with 8% reductions. However, we need the full buy-in and participation of all our employee unions to achieve this goal.
Our hope for the coming week is to arrive at meaningful concessions with all our employee unions. Ultimately our goals are to preserve the financial health of the City, continue to provide core services including our valuable parks and recreation to our community, and maintain current staff to avoid potential layoffs if at all possible.