Strains on its budget may mean the city has to cut about six positions in the next fiscal year, a move that could be marked by additional upcoming belt-tightening, city officials said.

The decision comes as the city’s facing increasing costs from the police pension and the employee health plan, and as cities prepare a state-impose cap on property tax revenue collections. This financial situation is likely to affect the city’s five-year planning, city officials said.

The positions the city cuts will likely consist of some that are already vacant or which won’t reduce services to residents, City Manager Brian Maxwell said.

The city won’t cut sworn personnel from the police or fire departments, Maxwell said. The positions the city does eliminate will come from those paid for through the general fund, he said.

“It could impact streets,” Maxwell said. “It could impact traffic. It could impact parks. Until we know better what positions and what we’re dealing with, we don’t know what those impacts will be.”

There are 814 employees of the city, but only 504.8 are funded through the general fund, according to the city budget. Some positions are partially funded through the general fund and others are paid for through grants and money dedicated for specific uses.

Excluding sworn police officers and firemen and women, departments with the most employees paid for out of the general fund include streets and traffic, parks and recreation and civilian police employees, according to the budget.

About 65 percent, $39.2 million, of the $60.3 million appropriated to the 2019 general fund is used for personnel costs, according to city budgets. The city’s total 2019 budget is $240.2 million budget, according to the city budget.

The city’s been feeling financial pressure from multiple sources, Mayor Pro Tem Craig Brown said.

“I think there’s a lot of things in play,” Brown said.

The Galveston City Council will likely need to make recommendations to city staff about ways to reduce costs in the upcoming budget season, he said. There could be across the board departmental cutbacks, Brown said.

The new budget year begins in October.

The city was already expecting to incur additional costs associated with an agreement struck with the police pension board to fund the ailing police pension fund, Maxwell said.

In new state legislation, which aims to move the plan back into state compliance, the city agreed to increase its contribution to the plan to 18 percent from 14.83 percent.

This will cost the city between $400,000 and $500,000 more each year, city officials have said. The city now contributes about $1.77 million a year and the increase will push that to more than $2 million, city officials have said.

But the city wasn’t expecting increased costs from its employee health plan, Maxwell said.

“It has to do with claims,” Maxwell said. “The health insurance costs have been trending upwards. We’ve had a high utilization year.”

In the 2017 to 2018 fiscal year, which starts in October, the employee health plan costs totaled almost $9.1 million, city spokeswoman Marissa Barnett said.

By the end of April this year, the plan had already cost the city $5.8 million, she said.

At this rate, the city expects much higher costs by the end of the fiscal year in September, Barnett said.

“Health fund increases are from higher claims, increased utilization and medical inflation of about 8 percent,” Barnett said.

The total difference between contributions and costs was $911,804 for the entire fiscal year last year. By April of this year, the difference was already $898,263, Barnett said.

There are other components adding to the city’s financial constraints. This is the last year since 2013 the city will contribute to an infrastructure fund that takes 1 percent of the general fund operating budget for capital improvements, a hit that this year will remove about $700,000 from general spending, Maxwell said.

The city will also need to plan ahead in anticipation of state legislation that prevents cities from collecting over 3.5 percent more property tax revenues than the previous year without a vote from the voters. City leaders have decried the legislation as one that would hamper growth.

It’s not something that will affect the city this year, but something the city must plan ahead for, Maxwell said.

“We’re trying to get as efficient and as lean as we can,” Maxwell said. “Our main goal is not to reduce service. This is just a bad year.”

Keri Heath: 409-683-5241; or on Twitter @HeathKeri.

(7) comments

Raymond Lewis

Did I overlook a target amount the city manager expects to achieve through employee cuts? Is there one?

Gary Miller

I can't understand how collecting less property taxes would limit city growth. Limit tax collections, yes, but city? Lower taxes has been proven to encourage growth. I guess they are talking about growth of city budgets which have not been limited by anything except taxpayer resistance. Past city budgets were built on "want" instead of "need".

Miceal O'Laochdha

Another story today tells us the $90,202.68 job of City Marshall, which has existed for less than 2 years, is being vacated and will be re-filled. Here is a suggestion: do not re-fill this newly created job, SAVE THAT $90K+, and then maybe save some lower-paid employee's position into the bargain. There are two typical approaches to reducing payroll. You can RIF a lot of low-paid employees, or you can RIF just a few high-paid employees.

Christopher Webber

City pays Ike recovery contractor $13.5 million By KERI HEATH The Daily News Jan 1, 2019 GALVESTON The city on Monday ended a long-standing legal battle with a $13.5 million payment to disaster recovery contractor CDM Smith on money owed for work completed before the two parted ways in 2012, according to a city spokeswoman. The $13.5 million is $400,000 less than the maximum settlement payment approved by the Galveston City Council earlier this month and $2.2 million less than what a district court ordered the city to pay in November. The court originally ruled the city owed $15.7 million in a lawsuit it lost in September. The city has been locked in legal battle with the company, which used to be known as Camp Dresser & McKee, since officials fired the firm over complaints about performance on a post-Hurricane Ike housing reconstruction program. “The city of Galveston reached an amicable resolution with CDM Smith,†city spokeswoman Marissa Barnett said. The payment came from the city’s general fund and had to be paid by the end of the year under terms of the settlement, she said. “We’re pleased to have reached a final resolution with CDM Smith,†City Manager Brian Maxwell said. “We appreciate CDM’s willingness to work with us and bring this litigation to a close.†The city hired CDM Smith in 2009 for a Hurricane Ike disaster recovery housing program. The Massachusetts-based company originally sought as much as $30 million for work it said the city hadn’t paid for before the termination. The city will have to do some belt tightening to account for the $13.5 million payment, city officials said. After the court decision in September, the city made plans to cut general fund spending by 2 percent, officials said. The city may freeze some positions or cut spending, but residents shouldn’t expect a reduction in services or any delays in capital projects, officials said.

Michael Moriarty

What is the value of receivables related to unpaid fines over the last 5 years, including those deemed noncollectable and removed from the books. There seem to be numerous code violations throughout the city that are never corrected. Is there revenue generated by these and if so, how much? It seems it would have been appropriate to report this at the "State of the City," along with a plan to rectify any problems. Maybe someone at GDN could investigate these issues!

Janis Bennight

Should have been planning long ago not depending on tourism. Take care of your own not your pockets.

Janis Bennight

Posted by Steven C. Bennight

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