The City Council was finally able to lift the fiscal emergency originally declared in 2009 on Tuesday night while also approving a budget for the coming year that is balanced through another year of pay cuts for city employees.
“It’s a City Council-based budget centered on your priorities,” City Manager Bill Workman said. “The budget is adjusted to the new realities of this financial world… and permits us to live within our means.”
Workman recommended the resolution lifting the emergency because the city’s revenue projections are slightly increased this year and the city’s use of financial best practices have been recognized by Standard & Poor’s with a confirmation of its AA+ bond rating. The budget was able to be balanced while maintaining an 8.33 percent, $5,677,733, general fund reserve and the city’s 2012-13 budget expenses related to labor shrunk compensation by six percent. “The council, through its choices, has reached financial stability,” Workman said.
The state of California’s $16 billion budget deficit loomed over the city’s budget proceedings. The state’s ongoing financial troubles could mean additional mandated costs for Redondo Beach if program responsibilities are transferred from state to city without additional resources to fund these programs. Earlier this year, for example, the state abolished Redevelopment Agency (RDA) programs in cities throughout the state, resulting in a $1,116,00 state expense to pay-off previous RDA debt and a $10 million loss to the city.
Additionally, investment earnings since 2009 have dropped from $1,781,175 to $600,000 this year, a decrease of over 66 percent in just five years.
“That’s huge,” said councilmember Bill Brand. “It’s not because of the City Treasurer; it’s because of the marketplace.”
The council was especially wary of potential future cuts to employment in the local aerospace industry due to program slashes at the federal level. The state cuts in the prison and justice system has also, according to the report, contributed to a 20 percent rise in crime due to overcrowding at prisons and court back-ups.
“The city is primarily a service organization with nearly 77 percent of our costs associated with the personnel that provide these services reside in the General Fund,” Workman’s proposed budget summary said.
The biggest looming issue on the horizon for the city is the amount of money it will be required to contribute to the California Public Employees’ Retirement System (CalPERS). Although city employees agreed to 6 percent pay cuts – again, for the third straight year – the city’s total personnel costs are increasing because of fast-growing health care costs and uncontrolled CalPERS retirement costs. The budget plan outlined an additional need of $393,489 for the CalPERS reserve fund, even though employees have not seen an increased paycheck and there are 64 less employees than five years ago.
“We won’t be able to control our [Cal]PERS costs unless there is state reform,” Workman said. “On the current trend our revenues are not keeping up with our additional retirement costs that we see in the next couple of years… If we don’t get containment and reform we will have to cut services and capital projects, there’s no two ways about that.”
The city’s general revenue of $62,210,114, which includes a tax revenue increase of 1.9 percent and an increase of 3.8 percent in licensing and permits, will increase by $777,748 despite lower interest rates and a recessive economy. And despite decreases in revenues, but because changes in parking practices and operation savings, for the first year in many, the Harbor Tidelands and Uplands Funds are coming in with a revenue increase of $299,980 and a decrease of expenditures of 46.1 percent, for a total of $8,977,244 in expenditures.
“I have to tip my hat to the council for making all these big choices to keep us in financial health during the worst budget times that we’ve seen since the depression,” said Workman.
“It is the worst times, but to me it’s the most understandable times,” said councilmember Pat Aust about the readability of the budget. “We used to get knee deep in this stuff and you still didn’t know what you were doing. It was like being in a swamp; you hoped you could find your way out of it.”
The city’s expenditures decreased by $1.6 million due to overestimated expenses from the 2011-12 midyear budget leaving a surplus of $98,583.
“I would be remiss not thanking the employees,” said Workman. “It’s only with the result of them taking concessions… we would not have been able to do this without their partnership.” ER
