Current estimates by our finance department demonstrate that the "gap" will be about $10 million in 2010, and increase to $25 million in 2014 if we do not take action now to control the upward spiral in expenditures and re-examine our various revenue sources. Peoria's budget has three main components: operating (78%), debt (10%), and capital (12%). When looking to trim or control expenditures it is only logical that you start by looking at the largest portion: operating. And it doesn't take long to see that 80 percent of the operating budget is about people-the 800 men and women who provide over 450 services to the citizens of Peoria. Over the course of time, the services provided by Peoria have grown or been enhanced as we have sought to improve the overall quality of life afforded our citizens. We've grouped them in six broad categories (public safety, infrastructure, land use, economy, neighborhoods and stewardship). Many of these enhancements-such as in land use and neighborhood stabilization, or economic development and public safety-have become mainstays of the City.
We are at a fork in the road and some difficult decisions need be made. The only responsible course of action is to examine how we can balance our service offerings and the people who provide them, with the changing revenue picture. It is for this fundamental issue that we are exploring several options to align services with what we can reasonably afford (and what we believe the public is willing to pay for).
Presently, the City Council is examining a general wage freeze. Why? Consider that scheduled wage increases for 2010 have a tremendous impact on the budget to the tune of about $3 million in salaries and another $1 million increase in benefits. To accomplish this freeze, however, means that City employees need to be willing to forego cost-of-living raises and step increases. It also means that the City must negotiate with each of the nine bargaining units that represent 90 percent of our workforce. On this score, I am pleased to say that we have been meeting informally with our union leadership to explore mutually acceptable ways to deal with this challenge. I am proud that over the past few years the City Council and management have negotiated in good faith to pay our employees fairly. The contracts in place represent an honest exchange of work for wages and allow the City to attract and retain quality employees. It is from this base of mutual respect that I hope we can reach an acceptable agreement on capping wages in 2010.
Another option we are looking at-and this has been done in the private sector as well as in other units of local government-is voluntary separation. Voluntary separation initiatives have the benefit of trimming payrolls in a manner that leaves the decision with the employees. We are exploring a package combining a cash payout, perhaps based on years of service, with some medical insurance assistance. The goal, of course, is to encourage a significant number of employees to leave the City's employment. As each position is vacated, we will determine if a position can be eliminated altogether, remain vacant six months or longer, or be filled with a new employee at the lower end of the pay scale. Success will be based on a commitment to restructure internally within departments. And this points to another important initiative in living within our means.
The realignment of City government is perhaps the most difficult task of all, as it is based on determining those services we must offer as a municipal corporation against those services that are "nice to do" but not essential to the public's health and safety and essential quality-of-life requirements. Together with the administration, we are reviewing each of our over 450 services to make sure we make the best decision in the overall interests of the City.
While I have concentrated on the expenditure side of our budget, we have no intention to try to make up the entire $10 million on the backs of employees and the services they provide. In fact, it would be almost impossible to do so and maintain an acceptable level of essential life safety and quality of life services. Just consider that on average, it costs the City $100,000 for each employee (salary and benefits). Taking a $10 million bite from our budget this way means that we would have to eliminate at least 100 positions. I don't see that happening. But I do see a smaller-sized employment contingent as we are committed to make fundamental changes in the way we do business.
Rest assured that as the City Council looks at the revenue side of the equation, we will keep in mind the impact on the taxpaying public and the need for Peoria to remain economically competitive as a desired place to live and work. For example, we are very proud that the City has basically lived within the same property tax rate for 12 years. We also remind the public that for 11 cents on the tax dollar, Peorians receive a high degree of dependable and quality services.
You will continue to hear much about the challenge of budgeting in the months ahead. And while we are looking forward to economic recovery, there is no question but that we must be realistic and live within our means in the foreseeable future. iBi
