Hayward announces hiring freeze, creates ‘budget war room’ after city drains $31 million in reserves

The city of Hayward has publicized it will freeze hiring for vacant positions as city functionaries including an interim finance director and city manager grapple with a structural budget deficit that drained million from the city s reserve this past year and nearly emptied its coffers The city has formed a budget war room to revise the fiscal year budget and avoid the overestimated revenues underestimated expenses overhiring and purchase of a downtown movie theater that led to the city s current economic woes It was a perfect storm We added positions to respond to demands we negotiated new labor standards and there was also the expenditure to purchase the theater and frankly we have particular internal overtime spending controls that need to be tightened up explained Chuck Finnie communications and marketing officer for the city of Hayward We cannot afford to operate as we have been in the last months When Hayward adopted its budget in June city leaders already knew it would need to be revised Hayward Mayor Mark Salinas explained The approved budget anticipated using million in reserves from the general fund which had been depleted the previous year Finnie disclosed Interim City Manager Jayanti Addleman pulled together the budget war room to identify and address the causes of the structural deficit Starting in January of this year which was six months halfway through the fiscal year we had a new city manager and a departed finance director Finnie declared We weren t going to have the money and so we needed to get a firm grasp on what the causes were of the over-budget spending in the last year The first of these missteps the working group determined came during the rush of hiring during the pandemic as the city added the equivalent of employees to its expenditures These costs were exacerbated by unbudgeted overtime expenses and the new labor contracts for the city s firefighters police and other city workers Finnie mentioned Hayward s finance department also overestimated revenue for the city which mostly comes through property taxes a property transfer tax and a tax on utilities For the fiscal year Hayward s revenue is estimated to fall million to million below expectations although the real number will not be known until September Finnie explained We started to understand that our entire general fund operating reserve had essentially been exhausted by the end of the fiscal year that ended on June Finnie noted That wasn t going to work because we weren t going to have the money The city also spent million to purchase a Cinemark movie theater located on B Street at Foothill Boulevard In total the city spent million in the fiscal year more than million over the budgeted expenditures for the year Salinas revealed the movie theater purchase was to bolster the business region downtown but when required if he would make the decision again the mayor was curt Well I m not going to invest in another movie theater Salinas described Bay Area News Group We need to be prudent and keep watching what we spend money on The hiring freeze is the first step in curtailing spending as employee salaries are the largest expenditure for cities Finnie reported He reported the focus of city leaders in the coming months will be to preserve city services without firing any employees while charting a path to replenish the city s reserves But balancing Hayward s books will not be accomplished in the coming year More than likely city leaders like Addleman and Finnie are looking at a multi-year effort to bring the city back to good financial standing It s imperative we find solutions to save bring spending back into balance with revenue and state to rebuild our reserves interim city manager and director of library services Jayanti Addleman declared in a city press release We didn t get into this position overnight but we must act now to protect organization to the Hayward area and the jobs of those who are providing these services While budget deficits among Bay Area municipal governments are not unique Oakland San Jose and Fremont have each grappled with large deficits since the pandemic Hayward may become a scenario evaluation for other localities about how expeditiously a city s reserves can be depleted Finnie announced Our expectation is that we re going to be able to address our fiscal necessities in the current budget year without layoffs Finnie announced Where it will become an issue is when we have other demands that come up or other program decisions that are coming up