City Council's choice: Fund health plan or 911 system
By Caitlin Davis, Senior Staff Writer
May 16, 2014, 12:18
HOPEWELL — With the days quickly approaching on the deadline for the fiscal year 2014-2015 budget, Hopewell City Council is still unsure of where the funds will be spent. At the City Council meeting on Tuesday, the discussion remained on funding the increase in health insurance for city employees or funding a new communications system for police, fire and EMS.
City Manager Mark Haley said to fund the communications system, council has to “dip into their cash reserves.” He said due to council’s desire to use a portion of the fund balance, the proposed budget became inflated, from $43.9 million to $47.8 million, which reflects the addition of the funding of the communications system and funding half of the city employees’ health insurance increase.
That inflation of the budget and the reduction of the fund balance percentage, caused Haley to express concern.
“A reduction in reserves to a level that staff found less than desirable at 10.5 percent,” Haley said. “Bear in mind the amount of reserves in regards to emergencies, and since then, one has come up. We’ll have to, at some point in time as soon as possible, replace a bridge of unknown cost, but it’s going to be expensive to say the least.”
The East Broadway bridge was closed recently due to a failed inspection. When the bridge was inspected in April, the report indicated the bridge could collapse under its own weight. Since that time, the bridge has remained closed to traffic as well as pedestrians.
James Sanderson, with Davenport and Associates in Richmond, also echoed Haley’s concerns with the fund balance approaching the 10.5 percent level. He said it will not cause too much of a concern in terms of the city being able to borrow money but rather being able to maintain operating expenses on a month-to-month basis.
He gave the example of Fairfax County, once being a triple-A-rated county and one of the wealthiest in the state, being downgraded in their rating because their fund balance reached the 10 percent level.
“For us it can be a small project that can eat into our fund balance,” Sanderson said. “What actually worries me more is how you get down in your equity level when you start to approach a 10 percent or $5 million. You look at cash flow balances each month. ... It’s making sure we can pay our operating expenses in that low point. ... It’s going to make me very uncomfortable ... as to whether you can function without having to go out and do short-terms loan until that next set of tax revenues come in.”
The city manger’s recommended budget includes paying for a one-time expense of a comprehensive plan at $100,000, paying 50 percent of the city staff’s health insurance increase for a total of $604,000 and to pay a total of $33,000 to those city staff who chose to opt out of the city’s health insurance.
The recommended budget also calls for $393,100 to fund new positions and a reduction of $170,000 in capital projects for various departments in the city. With this option, only $737,000 will be taken from the fund balance, which keeps over $7.9 million and leaves the percentage at 17.4, a level much more desirable to the city manager and city staff.
In past meetings, council has indicated a desire to pay for the communications system, citing that the police and fire departments have expressed concern over the life left in the system, with Haley even saying the system is currently operating on a “wing and a prayer.”
“I don’t agree for paying for the communications system now especially with the onset of the bridge repairs that will be needed,” Councilor Brenda Pelham said. “And to pay cash for it right now would be kind of crazy especially because of the bridge project, so I will not be voting for that option.”
An option for the budget that many councilors have supported would be to pay the total increase for employee health insurance coverage for a total of $1.2 million and funding the communications system at $2.2 million. With both of those options presented, it would take over $3 million out of the fund balance for the city, leaving $5.6 million and reducing the percentage to 10.5.
“I think it would be wrong to earmark the $2.25 million for the communications system at this time. It’s going to take another, who knows how long, to build the public safety building,” Councilor Wayne Walton said. “I think we should support the employees. We’ve talked about different ways, percent raise, paying their insurance.”
Vice Mayor Jasmine Gore said while she does support paying for the health insurance increase for city employees, she does not support paying the full increase.
“I hate to say it but it kind of makes sense not to fund it completely because people are going to get hit harder next year if we don’t do this again,” Gore said. “They might get used to having that cushion ... but then if it comes up higher. ... It’s going to be even more of a burden.”
As council continued to debate the funding of the two major projects in the budget, the revenue from Vireol was brought into question as to whether that would aid in any of funding.
“Based on history of the previous plant where there was litigation and things of that nature, we just don’t know,” City Finance Director Jerry Whitaker said. “The plant’s opened today, come January 1 of 2015 they can decide to close the doors and that revenue, if we should budget it now, would not be in place.”
Whitaker added the taxes from the plant will not come to the city in time for this budget year. The amount of tax rebate is also not certain, with Whitaker saying it could be between $500,000 and $1 million.
Despite the continued debate on funding, Councilor Roosevelt Edwards remained adamant that the communications system was needed for the city. Though he showed his support for the city employees, Edwards said the health of a few pales in comparison for the health of many.
“But no one is mentioning our safety of our city,” Edwards said. “We need this communication system. ... We all have children, we have wives, we have husbands, we need this communications system. The chief [Keohane] has come before us but we’re talking about two percent and not our safety. We need this communications system, find the money and we need to get it.”
A public hearing for the budget will be held on Tuesday, May 20, at 7:30 p.m. in council chambers. Council did not take action at the meeting on Tuesday night but voted to hold a special meeting on May 27 to adopt the budget.