City of Richmond: Multi-Year Budget Update

Report National Resource Network Richmond, California December 15, 2015 Finance + Operation

In 2015, the City of Richmond, California, partnered with the National Resource Network to develop a long-range financial plan that would help the city avoid continued budget deficits. Over the previous six years, the City had spent down its accumulated reserves by $45 million Among other challenges, the city was dealing with high revenue volatility, exposure to variable rate debt risk, prior general fund advances to poorly performing cost-recovery funds, depletion of the City’s cash position, and ongoing significant infrastructure funding needs.

The Network’s analysis showed that, without corrective action, Richmond’s fund balance would be negative 22.7 million by FY21 without corrective action. To accrue a 10% fund balance, the City would need a $39.4 million swing in expenses or revenues by the end of FY21. If an average one percent salary raise were to be granted, the fund balance would drop to negative $25.2 million and would require a $52.4 million swing in expense and revenues to achieve the same 10% fund balance.

The Network team presented city leaders with opportunities to explore cost savings and revenue generation, and outlined several paths forward with different variables and outcomes. The team also stressed that decisions made in the following year would either lead to increased financial stability or increased financial distress. In order to reset the city’s baseline budget, council definitive action by the Council was necessary; including: impacts to employees (either in cost-sharing or positions) and service level reductions. Immediate budget action by the Council was needed to build and maintain a General Fund reserve.

National Resource Network consortium member PFM led the Network’s engagement in Richmond. PFM also led a Phase II of this project; information on it is available here.

City of Richmond: Multi-Year Budget Update