While the COVID-19 pandemic, weather disasters and declining sales tax revenues have strained municipal budgets across the Rio Grande Valley, one Mid-Valley city is looking at a seven-figure deficit as it works to balance its budget for the 2020-21 fiscal year.
In a series of budget workshops the city of Mercedes has held over the last few weeks, officials have learned that the rising costs of its public safety departments — fire, EMS and police — are contributing to a $1.1 million budget deficit for the coming fiscal year.
“We are at $1.1 million,” Mercedes Finance Director Nereida Perez said of the deficit at the end of the most recent budget workshop Wednesday.
Her response came after Commissioner Leonel Benavidez asked the finance director to summarize the status of the city’s financial hurdles in the wake of a revelation that its ambulance service would not be reimbursing the city certain funds which it was previously expected to provide.
The city founded its own municipal-run EMS service just last May, contracting with state Rep. Armando “Mando” Martinez to administer the program. Officials were repeatedly told the EMS service — which is run as a part of Mercedes’ fire department — would ultimately become a self-sustaining operation that would reimburse the city for the cost of payroll and other expenses used to run it.
Indeed, when commissioners were first presented draft budget figures in mid-July, several hundred thousand dollars of EMS reimbursements to the city’s general fund were factored into the calculations as part of the city’s total $11.6 million budget.
But those monies likely won’t be coming — an issue which was not brought up in the city’s early budget workshops, when Martinez was on hand to explain line item expenditures.
The city had initially expected to transfer nearly half a million dollars from the EMS back to the general fund, but so far, bill collections have fallen short of projections.
“We can’t transfer $470,000 at the end of the year if, based on their actuals, they only have $270,000,” Perez said Wednesday.
“Honestly, I don’t think they’re going to have $471,000,” she added a few moments later.
The EMS department also plans to grow in the coming year. In a budget workshop held July 22, Martinez said the department will be purchasing an ambulance and adding two paramedics to its roster in order to fully staff the city’s ambulances at all three shifts.
“What we are requesting is two additional full-time employees, being that we’re gonna have a COVID unit coming in in our third ambulance,” Martinez said.
“There’s a lot of concern in the amount of calls (that) have almost tripled in our department. And two extra hands — actually four extra hands — would be helpful. That would allow us to have six people on duty (per shift),” he said.
The city’s bottom line is also being stressed by a rise in expenditures in the police department.
Between the cost of adding new employees and equipment, a contract to house prisoners in Weslaco due to Mercedes’ own jail being unfit for occupancy, and the financial strains imposed by the COVID-19 response, the police department budget has ballooned significantly over the last year.
The department added 13 employees to its ranks — a mix of officers and 9-1-1 dispatchers, Police Chief Dagoberto “Dago” Chavez explained in late July.
The department grew from 32 staffers and officers to 46, including himself, the chief said.
Also over the last year, the department purchased several vehicles, uniforms and other equipment, and began work to retrofit the public works department building on the north side of town into a new police department and jail.
Once the pandemic struck the Valley in March, the department’s use of overtime also skyrocketed.
But commissioners began to question how the police department budget had been calculated after confusion arose over reimbursements from federal law enforcement grant programs, COVID-19 CARES Act funding, a budget known as “Fund 7,” which the commission has not been given access to, as well as sharp increases among the department’s contractual services budget.
Chavez said the department’s response to the pandemic and Hurricane Hanna had caused the most recent increases in overtime expenditures, but added that certain overtime hours could be reimbursed by two federal grants: Operation Stonegarden and Operation Border Star — both offered by the Department of Homeland Security for border-related law enforcement activities.
“Any overtime that’s in the general fund, it’s for the general fund only,” Chavez said July 29.
“Any overtime that’s in Stonegarden or Border Star will not show up because it’s tracked in a different fund,” he said.
When asked what fund that was, Perez, the finance director, said those monies were tracked in “Fund 7.”
Commissioner Benavidez asked if that fund was included in the finance department’s regular budget reports to the commission, to which Perez said no.
“I think that we should see those monies that we’re not seeing here in advance, so we can get some kind of scope,” Benavidez said, questioning how commissioners can get a true grasp of the police department’s needs if they’re not seeing all of its revenue streams.
“If we’re in the red over $400,000, now we’re thinking cuts, right? Somewhere. Be conservative,” Benavidez said to the chief.
“But if we have a healthy budget because we’re going to get reimbursed, then it helps with the decision-making, in how efficient we have to be,” he said.
It remained unclear how much of the police department’s overtime was being paid out of the general fund, and how much was eligible for grant reimbursement. What was clear was the department has already far exceeded its original overtime allocation of $100,000 by nearly 50% — $46,000.
Mayor Henry Hinojosa advised the chief to either put a stop to overtime spending, or to notify the city manager so the commission could consider approving additional money via a budget amendment.
“Once you see that we hit the $100,000, either stop it and no more overtime, or Sergio presents an amendment to the commission,” Hinojosa said.
“But to go 46-thou and take it for granted that we’re gonna include this for the next fiscal year budget, pues , well, that’s not sound. Me entiendes ?” he said.
Meanwhile, Commissioner Cristella “Cris” De Leon Hernandez had questions of her own regarding the police department’s contractual services expenditures.
As she noted in late July, that budget line has increased from $17,000 in fiscal year 2018-19, to $30,000 budgeted for the current fiscal year. The department, however, has surpassed that budgeted amount by tens of thousands of dollars.
With two months left in this fiscal year, it has already spent $81,000 and has put in a request for a $100,000 appropriation for the coming fiscal year.
“Is it really necessary to have $100,000 for this fiscal year? How can you justify (that)?” De Leon Hernandez asked.
Part of the issue stems from a contract for surveillance cameras at the city’s old police department, which has sat empty for some months because it is unfit for occupancy.
Though the building is no longer in use, the cameras remain. Breaking the contract would cost Mercedes at least $75,000, the chief explained. As a result, the city continues to pay $3,500 per month, as laid out in the terms of the contract.
The bulk of the department’s increased contractual expenditures are also a result of the building’s unfitness. Since last summer, Mercedes police have housed their prisoners at the Weslaco city jail under a contract in which the city agreed to pay Weslaco $54 per prisoner per day.
Another expense not reflected in the department’s proposed budget is the construction of a new police department and jail at the public works building. More than a year after Mercedes vacated the old building downtown, neither design plans nor a project budget have been finalized on the renovation and partial new construction of the new facility.
In a separate workshop last month, officials tried to pare the project scope down from a $2.7 million rough cost estimate to just $900,000 by removing features such as a sally port. But the architect on the project, Eli Ochoa, of ERO Architects, left city hall with no clear grasp of the kind of budget he has to work going forward.
And early drafts of the proposed police department budget show no money allocated to capital outlay expenses for the coming year.
In addition to overtime, there are also the equipment expenditures the police department has made since the COVID-19 pandemic began.
Thanks to the passage of a $3 trillion COVID-19 relief package by Congress in March, many local governments will be eligible to receive reimbursements for certain pandemic-related expenditures.
The funds have been disbursed to the counties, which are in charge of evaluating reimbursement requests and subsequently doling out the funds to individual municipalities.
Thus far, however, those reimbursements have not been distributed — nor are they guaranteed. Requests must first be analyzed by county auditors. Any expenditure not approved by those auditors will have to be borne by the city.
With many questions remaining, the commission ended what had been expected to be their final budget workshop Wednesday with the city manager saying he and Perez would work to balance the $1.1 million shortfall before presenting the commission a final draft of the proposed budget.
No date has yet been set for that meeting.