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Your City Council has a broad range of responsibilities for public health and safety. One of the most difficult is finding and allocating the money to provide them for you.
Last year we knew that the long and short of it was that if we accepted the actual cost of services in the rates for those services and cut back on new and replacement hiring plus reduce some non-essential, although desirable, services, we could balance the budget for next year either through increased tourism or borrowing about half a million dollars from our reserves. However, we (along with everyone else) did not expect as big a hit to our economy as took place. Our sales tax revenues fell 7% more than anticipated. Even though tourism is up, it doesn’t back fill the losses from anticipated sales and property tax revenues.
Our layoff prevention plan is working but will have to have cooperation from the employee unions to produce the least amount of harm for all of our employees and their families. Service levels are dropping because we don’t have the money to pay for more than we’re doing. Our citizens are also hurting and aren’t able to sustain the large increases in taxation and fees that would be necessary to sustain them. We are raising those fees that we MUST raise, as little as possible, to maintain a minimum level of service as necessary by Federal and State law as well as minimum health and safety standards. We are also implementing and asking our citizens to implement cost savings methods and procedures to preserve the highest levels of health and safety standards achievable.
We have left many city workforce positions vacant this year and asked current employees to pick up the slack. This is saving us $2.85 million this year. We have eliminated outside contracts for temporary help, janitorial services and night-time security for an additional $0.54 million in savings. We estimate that we may save an additional $394,000 from anticipated staff turnover. Our total reductions amount to $3.78 million. This still leaves us with an anticipated shortfall of $1.03 million which we anticipate making up from a variety of sources including reserves. However, there is more difficulty in the future and some additional risks in the present.
Future shortfall may be caused, in part, by Federal and State cuts or deferred payments to us from accounts that we traditionally get or which are designated for us by law. Although the State Budget situation is, at this writing, in flux, we are anticipating a $1.2 million raid of our money by the State to balance its budget. We also have known additional expenses to complete safety and repair projects already in process that will cost an additional $0.75 million. We can, possibly, make most of that up by not funding annual reserve accounts and raiding some of our current set-aside accounts in the amount of $1.6 million in fiscal 2010-2011 and begin to backfill the budget losses in fiscal 2011-2012. Our total shortfall over the next three years is anticipated at between $7.1 and $9.8 million. With less than $7 million in available reserves, we are in a difficult position.
There is funding for special purposes, which is independent of the “General Fund”. Those funds are separately audited and reported by the State. They include separate “enterprise” funds for water, sewer, airport and landfill. In all of those cases, the basic source of money to own, operate, maintain, improve and expand the services is fees or charges for service. Some special projects in these areas are eligible for partial State and/or Federal funding requiring local participation. These areas are required by law to be revenue neutral over time. We cannot charge more than the total cost of the service or product. Many aspects of the type, quality and quantity of service we provide is regulated and mandated by State and/or Federal law. Failure to perform a mandate results in fines and penalties, which may be severe.
The rest of our services and operations are funded by a variety of volatile sources. These sources are dependent on the general economy, real estate markets and demand for City services for which cost of service fees are collected. If our businesses do well, we do well. Our three largest sources of revenue are property taxes, sales & in lieu taxes and transient occupancy taxes. They account for nearly 2/3 of our total revenue.
We operate, as do most governments in California, on a fiscal year of July 1st through June 30th. Everything except the enterprise fund items are paid through the General Fund. We have prudently been under budgeting each year to build a reserve, which helped us recover quickly from the 2003 earthquake. The reserve is in jeopardy during an economic downturn.
The final decisions on budget depend to a significant extent upon the final budget the State adopts. I am fighting for some of our money throughout this process (see League of California Cities section) which threatens to take away a significant amount of our funding. It also depends upon our citizens paying for their City services through the fees for those services. The threat to our Redevelopment funds which help pay for some city positions is delayed pending a suit against the State brought by the California Redevelopment Agencies Association with which we are affiliated.
The State’s situation is another matter. The most non-partisan and insightful of the State agencies, in my opinion, is the Legislative Analyst’s Office (LAO) which has some excellent papers on budget, cash flow and various departments and spending.
For a better understanding of the State’s financial situation go to the “State of California” at the bottom of this site’s home page and click. Then go to the lower right side of that page under “Government Links” and click on “Agency Directory.” Under “State Agencies” click the first one: “State Agency Directory.” On that page click “L,” scroll to “Legislative Analyst’s Office” and click. Have fun reading, downloading and/or printing.
Other agencies and information is also available through the State site as it is through all of the links provided at the bottom of this site’s home page.