Folsom City Council Workshop on Closing Future Funding Gap - February 11, 2022
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Folsom City Council Workshop on Closing Future Funding Gap - February 11, 2022
This special workshop was held on February 11, 2022, from 1:00 PM to approximately 4:00 PM, to begin developing a strategy to close the city's future funding gap. City staff presented detailed financial information, potential solutions, and a proposed community engagement plan. The council provided direction to proceed with community outreach, explore a sales tax measure, and form ad hoc committees on specific economic development topics.
Public Comments & Testimony
- Lorette Hedinger: Noted that the station master's house (on the Y property) is on the National Register of Historic Places and stressed the importance of preserving historic district ambiance in any redevelopment.
- Robert Goss: Encouraged bold vision, said Folsom risks losing its regional position. Suggested documenting past cost controls, asking what residents/visitors should say about Folsom (e.g., "most fun small city"), and creating specific plans (not just master plans) for the central business district. He advocated for accelerating projects like the river district, Johnny Cash Trail, and a national-level museum.
- Bruce Klein: Questioned why Folsom received less ARPA funding than initially promised. Argued a sales tax measure would fail without a clear, specific use and a robust strategic planning process. Suggested exploring property sales/rentals for revenue. Emphasized the need for a vision residents can buy into.
Discussion Items
Financial Presentation & Projections
- City Manager Elaine introduced the workshop as a first step in strategic planning. The city is fiscally sound now but faces a structural deficit due to slower revenue growth (especially sales tax) versus expense growth (4.5% annually).
- CFO Stacey Tamani presented:
- General fund: $21M unrestricted balance expected end of FY22.
- Major revenue sources: property tax (34%, ~$33M), sales tax (27%, ~$26M). Property tax grows ~5%/year, but sales tax growth projected at only 2.5% due to e-commerce, changing consumer behavior, and reduced buying power.
- Citywide budget: $220M; general fund employees reduced from 452 (FY08) to 352 (FY22) – a 36% reduction per 1,000 residents (6.81 to 4.39).
- Unfunded needs: $39M in one-time costs, $20.5M in annual costs over next 5 years, plus 102 additional positions.
- Five-year forecast shows a deficit of at least $2.3M by FY27, growing.
- The Folsom Plan Area (south of 50) has net-zero effect on general fund; property tax increases are offset by required service costs.
- Councilmember YK Chalamcherla asked for breakdown of new staff needed for the plan area vs. general service levels.
Potential Solutions
- ARPA Funds: City received $8.4M (not $15.3M as originally expected). Already allocated $2.2M; council indicated interest in $560,000 for master plans. ARPA is one-time; cannot be used for ongoing needs.
- Revenue Enhancements: Rate/fee increases (e.g., 10% parks and rec fee increase yields ~$266,000/year). Raising ambulance fees unlikely due to changed usage. Planning/development fees require nexus study. Caution about tipping points (people leaving for cheaper options).
- Sales Tax Increase: A half-cent increase could yield ~$11M/year; full cent ~$22M. About 40% of sales tax is paid by non-residents. Neighboring cities (Roseville, Rancho Cordova, Sacramento, Davis, West Sacramento) already have such increases.
- Service Cuts: Limited further cuts possible; city is already lean. Eliminating programs would require strategic community input on priorities.
- Economic Development: Communications Director Christine Brainerd outlined strategies: retail recruitment, innovation district, workforce development, tourism, public-private partnerships (central business district, river district), leveraging healthcare cluster, pursuing grants. These are long-term and won't solve immediate gap.
- City Manager noted that economic development is table stakes for high-performing cities but cannot grow out of a deficit.
Community Engagement Plan
- Proposed two-pronged approach: educate community and seek informed input.
- Tools: statistically valid polling (consultant), online simulation tool "Balancing Act" (allows users to adjust service levels and see tax impact), "Flash Vote" for quick surveys. Also websites, social media, mailers, community forums.
- Goal: determine community priorities and appetite for solutions (including sales tax).
Key Outcomes
- Direction to Staff:
- Proceed immediately with community engagement process, including statistically valid polling and use of digital tools, to gather input on service priorities, revenue preferences, and vision for Folsom.
- Explore formation of three ad hoc council committees: one on underutilized/underutilized city properties (activation for revenue), one on retail/commercial recruitment, and one on economics of land use planning (to inform zoning code update and maximize return on investment). Staff to bring resolution to February 22 council meeting.
- Hold a public forum on March 8 (in-person, if health order allows) to present a summary of the financial challenges and seek community vision and input.
- Sales Tax: Council consensus to include exploration of a sales tax measure as part of the community engagement. Timing (2022 vs. 2024) will be tested through polling. Councilmember Aquino expressed caution about proceeding without a fully baked vision; Mayor Howell and others emphasized need for robust engagement to explain the problem and proposed uses.
- Additional Information Requests:
- Staff to provide breakdown of which new positions are needed for Plan Area growth vs. general service levels.
- Provide comparison of city salaries/benefits (including perks like cell phone, vehicle allowances) to regional peers.
- Provide analysis of overtime costs, particularly in public safety.
- Provide documentation of past cost-control measures to counter claims that cuts are still possible.
- Next steps: Staff to prepare for February 22 council meeting (daytime) to formally establish ad hoc committees and continue planning for March 8 community forum. Community engagement process to launch immediately.
Meeting Transcript
All right, I have one o'clock, Mayor. Me too. Okay, we will call to order the excuse me, special meeting of the Folsom City Council for Tuesday, February 8th. If the clerk would call the roll, please. Council members Kozlowski. Here. Rodriguez. Aquino here. Challenge. Here. And how if you guys will join me in the Pledge of Allegiance. Pledge Allegiance to the flag. Of the United States of America. And to the Republic. Okay. So we're on to our only item for today's agenda, which is a council workshop on developing a strategy to close the city's future funding gap and direction to staff. Okay, thank you, Mayor. And if I could ask uh Stacey Tamani to uh share our screen for the presentation today. Please be enabled. Okay, perfect. Uh good afternoon, everyone. Uh we as staff are bringing you this workshop in our continuing effort to bring critical fiscal information to you as early as possible to allow for timely, thoughtful strategic decision making. I have served as your city manager for over three and a half years now. And unfortunately, within weeks of me taking the job, it became clearing in progress. Became clear that we needed to ratchet back fiscally. Consequently, the near entirety of the last three and a half years has been marked by a need for financial restraint and constraint, which only dramatically deepened as the pandemic hit. I am deeply appreciative of the Folsom City Council's continued attention and commitment to prudent, wise fiscal decision making. It is never easy to lead, but leading is particularly challenging when resources are scarce and scarcer. I thank you for stepping up, and I thank you for making the hard decisions. I am also deeply grateful to the city staff and particularly the city's executive management team who have strived to focus on a get to yes mentality and approach, even in lean, uncertain, and unprecedented times. I am a proud 30-plus year resident of Folsom and also a proud 17 year city of Folsom employee. I can comment from both perspectives that as one would hope for from an outstanding dynamic city, home to so many talented people. Our community and you as the city council have high and ever growing expectations in terms of current and future city service levels, personnel, programs, facilities, technology, and infrastructure. We are here today, not because there is an immediate budget problem. We can hold our own in our current constrained state in the current fiscal year. And we can do the same again, still in that constraints state in the next fiscal year. But looking out farther, we know the trajectories are showing us that this is not sustainable, not only in terms of meeting current needs, but also in terms of making sure that we are meeting and ideally exceeding that very warranted community expectation pace. Please consider consider today's presentation and workshop as the first step in a strategic planning process for the city council. We feel very strongly that we need to take a quote first things first, unquote, approach to looking hard at some tough numbers as a first step. So that's what this afternoon is all about. This afternoon, you're going to hear first from Stacey Tamani, our director of finance and chief financial officer, who is going to very thoroughly take you through the details of our fiscal picture and the funding gap that we are seeing in the future. Stacy will also highlight current and future needs organization-wide, many of which have been deferred for far too long. We will then discuss our American Rescue Plan Act or ARPA allocation from the federal government. We will also discuss potential revenue enhancements. Cuts are also an option for the future, and we will discuss those. From there, communications director Christine Brainerd will discuss economic development strategies that the council may wish to prioritize as we plan for the future. These categories reflect the city's vision and guiding principles as outlined in the vision statement and guiding principles of the city's 2035 general plan, which we brought to you for your adoption. Her presentation was prepared in consultation and partnership with Joe Galliardi of the Greater Folsom Partnership. And finally, Christine will discuss how we propose to engage our community in this critical conversation and to help us understand what their priorities are and what their appetite is for various possible approaches to close that future funding gap. We're very much hoping to leave this workshop with direction from you to embark on that process.
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