Big Loans And Balanced Budgets

In Which: Hayward takes out a big loans to pay for wastewater treatment, The City budget finds balance at a cost, And Council disagrees on pet projects.

Okay, so I know the HUSD Board of Trustees meeting was last night. It sounds like there was a wild upset at 2am, when they ended the 9 hour long meeting, where the Board voted to put Superintendent Reimann on Administrative Leave pending an investigation. I haven’t watched the meeting yet and don’t know what the investigation covers, but keep your eyes here for updates next week!

Hayward Takes Out Big Loans For Wastewater

The City of Hayward voted this week to take out several loans totaling almost $500,000,000 to pay for the new Water Resource Reclamation Facility (WRRF). The first loan is a set of Bonds which will be issued in March, followed by a large loan from the EPA in April, and a third set of bonds to be issued in 2027. The loans will pay for the entirety of the WRRF project and be paid for by increases in sewer rates, which were approved last week. The payments will eventually hover around $33,000,000 per year for around 30 years.

The Council has been dealing with a lot of items related to the WRRF recently, because it’s an enormous project that needs to be dealt with now. “The largest projects that we have done in the history of the City of Hayward has been less than $100,000,000,” said Public Works Director Ameri, “So it’s like five times more than the most expensive projects… we have no choice.” The reason it’s costing the City so much and why it has to take out loans is because the City is required to build the new facility while being given no funding to do so.

So that leaves taking out big loans on the open market. The market interest rate on loans is around 4.5%, though the Financial Advisor for the project expected Hayward’s loans to be between 4.25% and 5%. The bulk of the funding will come from a market-rate WIFIA loan from the EPA for 49% of the project costs. Thankfully those can be deferred until 5 years after the construction date, around 2033, but it’s still a huge amount of debt.

The bonds will be submitted to a competitive bidding process, where companies that have way more money than they should will compete to offer the best deal to the City. The City will then pay back all that money, with interest, over the course of 30 years. It’s like a mortgage, basically.

Thankfully, the City did a lot of preparations for this—increasing the sewer rates and some other things—and has a good credit rating: AA+. The only other good thing is that this has no impact on the City’s General Funds. But even then, we’ll be paying the mortgages on this new facility, each and every one of us.

This Sucks, But We’re Doing It The Best We Can

The City Council recognized that the whole situation sucks, but that everyone worked together to make it suck as little as possible. “The City working together as a team does the hard work to make sure that we are managing our finances very well,” Councilmember Goldstein said.

Councilmember Bonilla expressed pride in the City’s credit ratings and the plan to replenish the Wastewater Enterprise reserve balance. He then tied the City’s fiscal responsibility to the environmental benefits of the project. “This is really showing,” he said, “that we have to be able to balance both the long-term protection of our planet and the Bay with the immediacy of making sure that we have a wastewater infrastructure that can support these future needs for future generations.”

Councilmember Andrews again pressed the public to contact their State representatives, because the State should help pay for its own mandates. “They are declaring that we reduce our nutrient levels,” she said, “which requires an extreme amount of funds in order to meet this in 10 years, which is very difficult… We need grants as well as loans in order to do this.”

Council Reviews Mid-Year Budget

The Council reviewed the mid-year budget for Fiscal Year 24/25 and it came with some news that will please Budget Hawks like Councilmember Bonilla: the budget was balanced, barely. But Assistant City Manager Dustin Claussen said, “It’s certainly come with some sacrifices around the City.”

For context, revenues were higher than expected, by about $10,400,000. Unfortunately costs were also up, around $11,900,000. Of that increase, $9,205,000 of it was for Salaries and Benefits—with a good chunk of that going to the Hayward Police Department, though the chart didn’t indicate how much went to each department.

Beyond that, there were some mid-year budget requests, but most of them were for things that had already been paid for. That included the cost of the Presidential Election, costs associated with Districting, a new vehicle for Development Services, and some repair for a Fire truck.

Along with that, Staff proposed some changes to the mid-year budget to account for decreased revenue from the Real Property Transfer Tax (short $2,000,000), but a $3,000,000 increase in the Utility User’s Tax—likely because of increased electrification and PG&E rates. Staff also recommended a hiring freeze for the rest of the Fiscal Year, like Council supported in a recent budget review session.

All of this worked together to eliminate the deficit and earn us $67,000 at the end of June.

As you can see, though, the 5-year forecast still puts us running out of reserves by 2029. But it’s a lot better than it was before.

Staff also presented a pie chart of what could be affected by a potential Federal Funding Freeze—you know, if the Trump Administration gets mad that Hayward is doing DEI stuff. The $2,600,000 is money we’ve already spent and need to get paid back by the Feds for. The $12,100,000 is money we’re supposed to get but haven’t spent yet.

It covers a lot of important things. Just something to bear in mind.

Federal Funding Looks Good—For Now

Councilmember Andrews asked what departments had made the specific cuts to balance the budget. Assistant City Manager Claussen said that he didn’t have specifics but, “If the dollars weren’t out the door, we said no,” he said. “Do I think it was well liked? No I don’t. I know it’s not, I’ve heard as much.” This hints that there may be some disconnect with the City Council’s joy at a balanced budget and Staff bearing the burden of austerity.

Councilmember Andrews then asked if there was any cut to emergency services. “We do not plan to cut any services,” Claussen said. Councilmember Zermeño asked how many positions were frozen, and was told that there was a vacancy rate of 10%, and only 5 positions were frozen in HPD.

Councilmember Syrop asked if there was any danger to having the Federal funding cut. “Right now those are okay,” Assistant City Manager Claussen said. “That doesn’t mean tomorrow we can’t wake up in a new news cycle and hear something else, but right now we’re fine.” Councilmember Syrop then asked if there were any contingencies planned, just in case, but Claussen only said that Staff would have to start thinking more deeply about it.

Councilmember Zermeño was glad to see the projects that rely on Federal funds presented. “You included the possible lack of funds from the feds,” he said, “and I appreciate that… it’s good for us to know that it’s a possibility.”

Council Calls Budget Disciplined And Strong

Councilmember Bonilla, long a critic of deficit spending, had lots of praise for the balanced budget. “I’m glad to see we have a balanced budget,” he said, “[it’s] a win for the entire community.” He stressed that there would be no loss of services. “We’re not compromising any of the important and essential services that our community relies on.” He also referred to the cuts, multiple times, in terms of a strength exercise, saying the city is “building muscle for fiscal health.”

“What’s reflected is more what I would call discipline and control over additional financial asks that are being presented at mid-year,” Councilmember Bonilla said. Councilmember Syrop agreed. “I think it’s significant when we’re sweating our budget when we’re looking at being under $40,000,000 in savings,” he said. “That’s a good sign. This is a team effort to ensure that we’re able to maintain our core services to our community.”

Mayor Mark Salinas also framed the changes as discipline. “I think we were able to get to where we are today because we’re disciplined,” he said.

Councilmember Andrews recognized that cuts aren’t enough, and highlighted a single solution. “This is the importance of supporting economic development,” she said, “as well as when businesses come to our community, we need the sales tax revenue. We need to not be a hurdle to those businesses opening.” However, shortly afterward she backtracked. “We cannot rely on sales tax revenue to balance our budget,” she said, “but it sure does help.” Councilmember Zermeño agreed. “Please shop Hayward first,” he said. “That is going to help us out.”

Council Argues Over “Pet Projects”

Councilmember Roche asked about a 2% reduction across all City Departments that was mentioned in the presentation, but was assured that the reduction would be next fiscal year. She then asked about capping discretionary spending by Council, specifically echoing comments from former City Councilmember Al Mendall and calling them “pet projects.”

Councilmember Syrop took issue with the idea of calling things pet projects. “I don’t think it’s right or smart to compare Juneteenth or Education City as pet projects,” he said. “I agree we can tighten our belts… but I don’t want to limit our imagination or discourage a culture of innovation.”

Mayor Mark Salinas agreed. “Pet projects,” he said, “sometimes that’s where we unleash our creativity or we unleash our innovation.”

Hayward Puts Up $1,000,000 For St. Rose

Included in the Mid-Year Budget review was a contribution of $1,000,000 to St. Rose Hospital. After having been bought by the Alameda Health System, the safety net hospital has been working to achieve financial stability, even at the expense of popular departments like the Family Birthing Center.

However, the Chief Operating Officer (COO) of St. Rose spoke at the meeting and outlined plans to get St. Rose back on financial track. County Supervisor Elisa Marquez put up $1,000,000 of her discretionary funding, and the hospital will be pursuing other sources to try to maximize $15,000,000 in matching funds. They also highlighted the completed sub-acute facility as a money-maker, trying to pursue Proposition 1 funding, as well as other reallocated funding.

Council questioned the financial stability plans of the hospital, but were generally supportive of giving what money they could. When asked if Council could see the sustainability plan, the COO responded that they just needed money to be stable—right now it’s all investing in stability however they can.

Supervisor Marquez spoke personally about how important St. Rose is, including an anecdote about her own family being helped there. The CEO of the Eden Health District also spoke and said that the District contributed $1,000,000 of their own meager $5,000,000 budget to help St. Rose. And they both encouraged the City to help in its way, as well.

Councilmember Bonilla was all in for helping St. Rose. “It’s important that Hayward does its part, too,” he said. Councilmember Andrews called for residents to ask their State representatives to defer the loan St. Rose took, but also stressed that the City wasn’t going to float the hospital. “The City of Hayward is not the sustainability plan,” she said.

Councilmember Syrop highlighted the $4,000,000 in ARPA funding that had been rolled into the General Fund last year and said that this is what it should be used for. “It’s no small feat to save a hospital,” he said. “This is what it looks like when a town rallies together to look after each other.”

Councilmember Goldstein also spoke to the community spirit of St. Rose. “If any hospital really embodies what I think Hayward residents also aspire to, that heart,” he said, “St. Rose has that in spades.” Councilmember Zermeño also agreed. “St. Rose is important to our City,” he said, mentioning that he had gotten help there himself. Councilmember Roche also recognized its importance. “I know what it’s going to do for our community,” she said.

Mayor Salinas reminded the public that he and Councilmember Bonilla had put this forward as a Council Referral several months ago, but also admitted that it wasn’t abstract for him. “St. Rose is my home hospital,” he said. “It would be devastating if we were to lose it. Not every City has a hospital.” He also tied it to the idea of “cradle to career” for his Education City initiative.

Closing In Honor Of A Victim

Mayor Salinas then closed the meeting in honor of Lydia Christina Guerra, who was fatally struck by a vehicle at the age of 25. In his remarks, the Mayor tied Ms. Guerra’s death to the need for safer streets, including traffic calming and road diets. He mentioned that at a recent Alameda County Transportation Commission meeting, the County-wide high incident map indicated a lot of activity along the 880 Corridor, and in Hayward specifically.

Her family has a GoFundMe page to raise funds to support emergency needs for the grieving family.