Spending Constraints Needed to Contain Parcel Taxes

The Municipal Tax Committee wants to minimize increases to Piedmont's parcel tax rate. When the committee delivers its recommendation for how to do so to City Council in August it will likely be accompanied by some tough advice on spending.

By itself a parcel tax increase of 2 percent a year (the rate was raised 2.6 percent in 2010-2011 based on the Consumer Price Index) would not be enough to keep Piedmont in the black, according to Municipal Tax Committee Chair Michael Rancer's calculations. Under current conditions, the city's general fund would wind up with a negative balance by the end of 2015-2016.

Rancer worked up several scenarios for how the city could get its finances under control by limiting fringe benefits for municipal employees, which are set to reach about 53 percent of total salaries under the proposed 2011-2012 budget.

If fringe benefits for city employees were limited to 50 percent of salaries starting in 2012-2013, Rancer calculated, Piedmont would be able to set aside a full 15 percent reserve by 2017-2018. If benefits were limited to 40 percent, Piedmont could achieve a 15 percent reserve two years earlier and would never find itself deficit spending.

"We get quite healthy," Rancer said of that latter scenario during the committee's meeting Wednesday, June 8.

But that would require big concessions from city employee unions.

City Administrator Geoff Grote said payroll deductions for retiree medical benefits and the establishment of a two-tiered system under which new employees would have to contribute more are on the table in union negotiations that are just getting underway.

"I think that it's going to be incremental," Grote said with regard to changes to the benefit structure.

Grote warned against the committee recommending that council focus spending constraints in any one area of the budget.

"If we're going to have pain, it's going to be spread around," Grote said. "Everybody's going to have to be told your greatest fondest dreams might not come true."

Some of those dreams: a subsidy going forward of about $400,000 a year for operation of the municipal pool (which is included in the proposed 2011-2012 budget) and city funds for maintenance of new facilities such as Blair Park should it be developed.