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State Budget Measures Fail – City of Alameda Scrambling to Identify Cash to Lend to the State of California

At last night’s Alameda City Council meeting, Interim City Manager Anne-Marie Gallant presented alternatives to further layoffs in the event that the State’s budget measures failed at the ballot yesterday. Those measures failed, and the City expects that the State of California may be borrowing as much as $2.4 million – maybe more – from the City of California. Cash the City doesn’t really have.

Last night Ms. Gallant told Council that she was expecting the State to borrow $2.4 million from Alameda in the 2009-2010 fiscal year, as a one-time event, with the money to be re-paid 36 months down the line. She also commented that depending on the outcome of the May 19 special election – unknown at the time of her presentation to Council – subsequent state budget wrangling in Sacramento, she fears the $2.4 million number might even increase, causing further strain on Alameda’s General Fund.

But for now, Gallant is focusing on how to come up with $2.4 million to loan to the State of California without further City of Alameda employee layoffs. She presented three basic alternatives:

    Re-payment of a loan from Alameda Municipal Power. About $1.5 million. It’s likely that few Alameda residents realize that in addition to the direct $2.2 million loan from the City’s General Fund to Alameda Power & Telecom (now Alameda Municipal Power – AMP) to support the ultimately doomed telecom division, for the past 36 months, AMP has been accruing a loan on their books payable to the City of Alameda for a City ordinance mandated 1% return-on-investment (ROI). Whereas AMP has supposed to have been paying a 1% ROI to the General Fund, they have for the past three years been paying only 0.4% to the City, and booking the difference as a loan. Another loan from the City’s General Fund to the power utility! Ms. Gallant figures they may be able to pull that loan in early from AMP to raise needed cash. NOTE that this is not the $2.2 million loan for telecom division which is still outstanding.

    Stretch out recovery from the General Fund of the workman’s compensation fund deficit. About $1 million this year. But the workman’s compensation internal service funds that have been running negative for the past 3 or 4 years would continue to go negative. At a previous City Council meeting,.Ms. Gallant told Council that a City would typically allow such a fund to run negative for only 1 year or so, and then re-pay the balance in the following year, and not let deficit accrue as did Debra Kurita, the former City Manager.

    Raid the equipment replacement fund. About $3.0 million. But then there would be no money to replace much-needed equipment, such as an expected fire truck replacement. According to documents provided by the City at the February 7th budget workshop, Account #119 “Equipment Replacement” has a balance of $2,902,999.

Ms. Gallant also brought up the prospect of the City borrowing the cash from the open market, but for $2.4 million, she didn’t think that made sense if the City could fund it from their own pockets. However, her view on that might change if the State increases the amount of money they want to borrow from the City of Alameda.

The final decision will be subject to a City Council vote when they approve the budget on June 23rd. But the City may have to re-visit and amend the budget if State negotiations drag on into late summer as they did last year.

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