Richmond's City Council passed a budget that is $2.9 million in the red but vowed to wring out additional savings in coming months.
"Obviously, staff has a lot of work to do," said James Goins, the city's finance director.
The city must dip into its reserve funds to cover the shortfall in the $136.2 million fiscal year 2012/13 General Fund budget.
But drawing down the reserves jeopardizes the city's A+ bond rating, Goins said. Under the council's direction, Goins and his staff will look to shave about $1.4 million off the deficit with a combination of public employee salary and benefit reductions and phasing out the practice of providing city cars to nonpublic safety staff. The city has already agreed to cut in half its annual contributions to a host of popular annual ethnic festivals.
After years of layoffs and chaotic city finances in the late 1990s and early 2000s, the city has enjoyed relative fiscal calm in recent years, amassing a $10.3 million reserve fund.
If no new savings are achieved, the reserve would shrink to about $7.4 million by next summer, according to staff reports, which would fall below the city's minimum reserve fund target of 7 percent of the General Fund budget.
"Rather than a balanced budget, we are saying come back with a targeted reserve level," City Manager Bill Lindsay said.
Pay cuts for the city's 900-person workforce are key to reducing the deficit but are only one part of an
The city will likely achieve some savings by discontinuing the practice of providing take-home vehicles to a dozen high-ranking staff members.
Cuts to employee pay would require negotiations with local unions. Human Resources Director Leslie Knight said earlier this month that the city must negotiate with six unions, and that at least two had already volunteered to concede sick leave buyback perks.
But pay cuts will be harder to come by. Mayor Gayle McLaughlin's proposal to cut 1.5 percent from the pay of nonexecutives who earn more than $100,000 annually has received a cool reception. The head of the police managers union has already said his workers would not concede a cut in pay.
All council members expressed a commitment to avoid layoffs if possible.
Layoffs "should not be a consideration if upper management isn't willing to cut their salaries first," Councilwoman Jovanka Beckles said.