On June 12, the Yucaipa City Council signed off on its 57,766-population city’s 2024-25 spending plan, which is to entail $7.3 million less in revenue than expenditures in its two operating budgets.
This is the second year in a row that the city is engaging in deficit spending. The revenue shortfall is to be made up by drawing funds out of the city’s reserves.
According to Phil White, Yucaipa’s director of finance, it is anticipated that approximately $35.7 million will flow into the city’s general fund from all external sources in the fiscal year beginning July 1, 2024 and ending June 30, 2025. Over the same 12 months, there will be $40.1 million in expenditures from the general fund. “The net of these budgetary flows is a general fund deficit of $4.4 million,” White stated.
The other category contained in Yucaipa’s operations budget is its public safety fund. This coming year, the public safety fund is projected to make total outlays of $23.5 million. Of that, $13.6 million is to be consumed by making good on the city’s contract with San Bernardino County for the law enforcement services of the sheriff’s department, which serves as the city police department in Yucaipa, as is the case with 13 other county municipalities, those being Adelanto, Apple Valley, Big Bear Lake, Chino Hills, Grand Terrace, Hesperia, Highland, Loma Linda, Needles, Rancho Cucamonga, Twentynine Palms, Victorville and Yucca Valley. The city contracts with the California Division of Forestry and Fire Protection, known by its acronym, CalFire, for both fire protection and paramedic services. Yucaipa is due to pay CalFire $5.3 million for fire protection services and $2.1 million for paramedic services. Included in the inflows to the public safety fund is a transfer from the city’s fire fund. While by set arrangment, the public safety fund is balance by the same amount of money being put into it on a yearly basis as it taken out, to do that this year requires a transfer of $2.9 million from the city’s fire fund. That $2.9 transfer is logged as an unfunded payment.
Thus, according to White, the City of Yucaipa’s budget deficit for the upcoming year, consisting of the $4.4 million shortfall in the general fund and the $2.9 million in the fire fund, is $7.3 million.
White said the city is revamping its accounting model and that previously public safety operations were accounted for within the general fund. He did not expound upon how the bookkeeping for the city’s public safety operations is now being cataloged separately within the public safety fund. He seemed to indicate, but did not explicitly state, that the overall public safety fund, of which the fire fund is a part, ultimately falls within the city’s general fund/operating fund.
Yucaipa by local standards is a relatively modest municipal operation. As the fourteenth most populous of San Bernardino County’s 24 municipalities with 2,068 residents per square mile across its 27.89-square mile expanse, it is the county’s 14th densest and thereby the county’s tenth least dense city. While, like all other communities, Yucaipa had a pre-incorporation history, its municipal founding took place in 1989, making it the county’s third youngest municipality behind Chino Hills and Yucca Valley. With 20 cities and one incorporated town in San Bernardino County having come into existence before it did, Yucaipa is a less mature municipal entity than most other other local jurisdictions and a significantly less mature one than a majority of those. Nor is it a full-service municipality, lacking its own police department and fire department and sanitation division, while its residents’ and businesses’ water service and sewer service provision is handled by a separate entity, the Yucaipa Valley Water District. As such Yucaipa has the 18th largest or, viewed variously, the seventh smallest, budget among San Bernardino County’s municipalities. Given its $40.1 million general fund budget, the $7.3 million deficit represents a whopping 18.2 percent of the city’s planned spending over the next year. Furthermore, this is the second year running in which Yucaipa will function at a deficit. According to White, Yucaipa ran a deficit of $2 million in 2023-24.
Yucaipa’s precarious financial position is of especial implication to Mayor Justin Beaver and councilmembers Bobby Duncan and Matt Garner, as well as City Manager Chris Mann. In January 2023, in the first substantive city council meeting following Garner’s November 2022 election to the council and his swearing-in the following month, Beaver, Duncan and Garner forced the resignation of then-City Manager Ray Casey, with councilmembers Jon Thorp and Chris Venable dissenting in the action and refusing to accept the resignation. Beaver, Duncan and Garner accompanied that action with the full council’s vote to terminate then-City Attorney David Snow, followed by a 4-to-1 vote, with Thorp dissenting, to replace Casey with Mann. Simultaneously, the council accepted bringing in Steven Graham as city attorney.
Under Mann’s leadership, the city has yet to match its expenditures with equal or greater revenues.
When White previewed the budget at the city council’s May 13 meeting, at which point he had already calculated the funding gap he presented as part of the budget proposal this week, it was made clear that city staff was already leaning toward a taxing option rather than belt-tightening in order to avoid systemic deficit spending.
“We are at a financial crossroads as it relates to the services we provide,” White said. “It’s no surprise that we are in a deficit budget position. While that’s okay for us right now, it’s not sustainable to operate into perpetuity at a deficit position. So we’re are almost at a time to choose what our strategy is going to be to come out of that budget deficit position. We have three options. One is to plow straight ahead and that is basically not changing anything as far as our service lines or levels and not coming up with the funding to fund those endeavors, which will lead to a much greater deficit. The second one is to veer left. That is great financially. It solves the budget problem but on the service side it has a significant cut in service levels and a lot of unhappy constituents because the funding levels people have grown accustomed to are not what would be in place. The third, which is the preferred option, is to veer right, which is a combination of modifying service levels and the way we deliver those services and ultimately finding new revenues to fund those things as we move forward.”
Absent from White’s May 13 analysis was discussion of seeking major concessions from the city’s employees to reduce city operating costs.
Likewise on May 13, City Manager Chris Mann assiduously avoided any mention of salary and benefit reductions for city employees.
“What you are seeing here is a budget that as much as we can keeps the deficit in a controllable spot for us right now, knowing we have to solve the long term problem,” Mann said. “We’ve been working really hard on the ways that can be done. We’re going to have a special meeting at the YPAC [Yucaipa Performing Arts Center], a city council community meeting where we will go through in depth kind of where we are, how we got here and what potential pieces of the puzzle there are to solve the budget problem.”
Yucaipa municipal staff members receive substantial salaries and benefits, ones that are comparable to those in most cities in San Bernardino County, including most of the 17 which have larger budgets. The Yucaipa finance director position pays $176,470.30, while Yucaipa management employees are typically paid around $20,000 yearly in perquisites and pay add-ons plus $41,000 in total annual benefits. This places White at an annual total compensation of around $237,470.30.
Mann currently has an annual salary of $207,840.17. With perquisites and pay add-ons of roughly $23,000 and total benefits of $45,619.29, he has a current total annual compensation of approximately $276,459.46.
At the June 10 city council meeting at which the 2024-25 budget was considered and ultimately passed, White in introducing the item to the council characterized the spending plan as “a one-year stopgap that will get us through the next fiscal year but that spotlights the serious financial challenge that is in front of Yucaipa. This budget will get us through the next fiscal year but the continued trend of deficit spending is not sustainable.”
White reiterated the basic staff message from the May 13 meeting, stating, essentially, that the city’s options were limited to doing nothing to redress the deficit, reducing services and/or raising revenues, which would most logically consist of a sales tax override to be approved by the city’s voters. He expressly omitted any mention of reducing city employee salaries.
During his presentation, White, in referencing the city’s cost “increases on the general fund side,” acknowledged “a couple million dollar increase on salaries and benefits.”
It was Councilman Chris Venable, after the staff presentation which limited cataloging the city’s options to continuing with deficit spending, cutting back on services or bringing in more money through taxation, who raised the concept of reducing city staff salaries.
“You keep on saying, ‘We need money. We need money.’ and I am going to pick on all of you, not just one,” Venable said. “The raises and salaries and stuff – I guess we approved that already. You made mention to that, right?”
“Yes, the negotiation with the two bargaining units,” White said. “We have two bargaining units. We’re entering the second year of a two-year agreement. So, each two years there’s a renegotiation. The prior negotiation wrapped up in May of last year, a little over a year ago. That’s good for two years. So, the next negotition will take place at the end of this calendar year, for Fiscal [20]26.”
Earnestly, Venable asked, “Can you postpone that until we get ourselves into a better situation? Because we’re talking – there’s $40,000 raises in here.”
“Once we have the agreement, we operate on the agreement,” White said. “Once the agreement expires, before the agreement expires, we negotiate a new agreement, and so we can negotiate whenever.”
“So, how does that make the city look?” Venable asked. “We’re going into a deficit and we’re going…” Venable’s voice trailed off. “I understand we passed this already, but we can postpone it, can we not?”
At that point, Mayor Beaver, himself a public employee as a police officer with the City of Azusa, broke into the exchange. “Well it’s a contract, is it not?” Beaver said. “Aren’t we contractually obligated to provide them the raises we agreed to? So, the answer is, ‘No,’ right? We cannot break our contract?”
Beaver’s interjections sidetracked the momentum Venable’s inquiries had created toward exploring the opportunity to seek pay and benefit reductions from the city’s employees that would present itself when negotiations on the next contract begin in December.
“Yeah,” said White, taking his cue from the mayor to bring Venable’s suggestions of seeking staff pay reductions to a halt. “I misunderstood the question. It’s negotiated. We’ve entered a contracted MOU [memorandum of understanding] with the bargaining units, and so to not follow through with that would…” his voice trailed off.
“Mr. city attorney, liability for violating a contract we’ve been adhering to for paying benefits,” Beaver said, half as a question, half as a signal that he should put a damper on any discussion of decreasing city employee salaries.
“If the city is experiencing a significant fiscal crisis or an emergency, we can, of course always entertain the option of going back to the table and attempting to renegotiate, but I would say simply unilaterally not following through with the terms of the MOU would likely be an unfair labor practice, exposing the city to significant liability,” responded City Attorney Steven Graham. “Generally speaking, when you’re looking at going through that negotiation process with your labor groups, you would want to be able to explain that you’ve exhausted all other opportunities before seeking to renegotiate a contract that has already been negotiated. The other thing I would point out is that as the city is a primarily contracted workforce, espcially in terms of public safety, your ability to control the wages – salaries and benefits – of the individuals who perform services for the city is extremely limited, primarily consisting of City Hall administrative employees.”
“In other words, we don’t negotiate pay benefits for sheriff’s deputies and firefighters,” said Beaver.
“Correct,” said Graham
“They hand us a bill and we pay the bill,” said Beaver.
“Sheriff’s deputies are under contract with the county and our firefighters are under contract with CalFire,” said Graham. “They control the salary and benefits for those individuals.”
Giving it a last shot, Venable attempted to suggest that the city finding itself in a financial deficit might constitute an extenuating circumstance that would justify entering into renegotiations with the city’s employee unions to seek concessions.
“What’s an emergency?” Venable asked. “What’s the amount of money you go into to… recall this pay raise?”
With Mayor Beaver glancing harshly at Venable while he was asking the question, Graham read the mayor’s body language and accordingly essentially closed down the conversation by saying it would be better for him to address that topic with a “confidential legal memorandum” to the city council members that would not be available for public scrutiny.
“Going into exactly what factual circumstances would warrant an attempt to renegotiate an MOU with one of our bargaining groups is not something I necessarily would want to discuss in open session on the dais,” said Graham.
When White said the city intended to look at what other cities were paying its employees and would seek to provide Yucaipa’s municipal employees wages based upon an average comparable to that, Venable pointedly asked, “But are those other cities going into, what is it, a $7.2 million deficit?”
“White responded, “I would anticipate that not all of them are.”
At that point, the body language of staff, most notably Mann, as well as that of Beaver and Councilman Thorp indicated a collective attitude that Venable had taken the concept of reducing employee compensation far enough.
As White said, it is common practice in Southern California for municipalities to make comparisons with other cities to arrive at the amount of money to be paid to their employees. This practice has resulted, according to the Little Hoover Commission, in boosting the compensation of public sector employees to twice that of private sector employees.
In 2019, according to the Little Hoover Commission, California state government workers earned an average of $143,000 per year, while local government employees earned something less, averaging just over $131,000 annually. California’s private sector workers at that time earned around $71,000 annually.
Beaver, as a public employee in the capacity of a police corporal with the City of Azusa last year received a total annual compensation of $230,267.26, which included $115,654.58 in salary, $50,350 in overtime pay, $6,070 in perquisites and pay add-ons, $35,159 in non-retirement benefits and $23,033.68 in pension system-related benefits. He steered the discussion away from any talk about cutting employee salaries.
His council colleague, Thorp, is employed by the San Bernardino County Sheriff’s Department as a deputy. In 2023, Thorp was provided with $253,290.86 in total annual compensation, including $109,607 in salary, $18,841.12 in overtime pay, another $15,207.88 in pay add-ons and perquisites and $109,634.86 in benefits.
“When my household is in a deficit,” Beaver said, “I have two options, and those are the only two options I have. I can either approach my boss and ask for a raise. In my analogy, the taxpayers of Yucaipa are the boss. Or I have to stop spending money. Alright, whomever [sic] wants to suggest we stop spending money: Tell me where? Where are we going to stop spending? Roads? Good luck. Show me on social media one day where we don’t talk about how bad our roads are. So, we’ll stop spending money on roads. Public safety? Cool. What? Twenty percent of our deputies gone tomorrow. We don’t need ‘em, right? Firefighters? There’s no fire danger in Yucaipa, is there? I’m being facetious, of course. I don’t know where we’re going to cut the money from. I don’t see it. But I’m also not an accountant.”
The mayor continued, “It’s really not rocket science. I’m a Yucaipa High School graduate with very little advanced education. I can tell you right now, money doesn’t lie. Either we have more money to spend, or we stop doing the services we have.”
In his universe, according to Beaver, reducing employee salaries is out of the question. He assiduously avoided any discussion relating to holding the line on city employee salaries or seeking drastic reductions in employee salaries and benefits in future employee contracts, which, as White said, are to be negotiated later this year.
Ultimately, during the discussion, Venable relented.
“I’m not asking not to give you guys the raises but to postpone them for a while until we get ourselves back into a better situation,” said Venable.
“I don’t think that’s going to solve the problem, though,” said Councilman Bobby Duncan.
After exhausting the discussion of what could be adjusted at present or in the near term, the council signed of, by a vote of 3-to-1, with Councilman Matt Garner absent and Councilman Duncan dissenting, to pass the 2024-25 budget, deferring approval of salary, benefit and classification plan for the city’s general, supervisorial, management and licensed employees until a later date.
-Mark Gutglueck