Park concerts, crossing guards on the block
Suspension of summer concerts in the parks and the elimination of the Community Emergency Response Team, the police academy, fire department public education and crossing guards were among the budget cuts discussed by the Manhattan Beach city council Tuesday night.
General fund revenues are projected to decrease by 0.3 percent to $49,274,023 while expenditures to increase 0.8 percent to $51,320,559 in the 2010-11 fiscal year. To balance the budget the city must shave the $2,046,536 difference.
“The economic problems of the past two years have had a resounding effect, and are challenging our historically solid financial position,” said Interim City Manager Richard Thompson in a statement prepared for Tuesday’s meeting.
Staff cited the real estate market downturn, weak retail sales, reduced tourism and historically low interest rates as causes for the drastic turn in a revenue base that has consistently grown traditionally.
“We see our revenues going down from what we budgeted last year,” said city finance director Bruce Moe.
Unreserved funds will cover last year’s $1.6 million deficit — slightly more than the $1.5 million originally projected by the city – and still leave a $2.27 million surplus for the city, which would more than meet this year’s projected shortfall. However, Moe said Tuesday that the city needs to shore up for coming years. By making cuts now, the city hopes to reduce the deficit to $174,259 by the 2014-15 fiscal year.
“It’s going to be a modest recovery,” Moe said. “We don’t expect it to come back going gang-busters.”
Five proposed changes recommended by staff would balance next year’s budget, which is scheduled for approval on June 15. An additional 17 cuts would boost the general fund by an additional $1.2 million and provide a cushion over the next several years as the economy makes its slow and unpredictable recovery, according to Moe.
Staff recommended council members cut $400,000 in city salaries to reflect current employment vacancies and $871,330 in fleet rental and informational systems services. The city also suggested the council’s $100,000 contingency fund be eliminated and a one-time reduction be taken out of the city’s insurance fund that would yield an additional $720,000.
“I think what is remarkable is that we can balance the budget without service cuts, without layoffs, without use of established reserves this year,” Moe said in an interview yesterday. “We just need to work on the coming years to develop a balanced approach to solving the deficits.”
Other proposed cuts included the removal of pay phones throughout the city, reductions in streetscape maintenance and janitorial services, and the elimination of the neighborhood watch volunteer dinner, council membership in the National League of Cities and city employee flu shots.
Staff presented council with a number of potential fee and tax increases, such as a utility user tax hike – which would require a public vote – and an increase in ambulance fees. The city would also generate an additional $45,000 by reducing the number of allowable false home alarms responded to by police – before a fine is issued – from three to two per year. An increase in parking meter prices and operational hours that passed earlier this year, combined with a continued suspension of bagging holiday meters, is expected to rake in $134,000 next year.
The city expects an increase in sales and transient occupancy taxes, as well as an additional $100,000 in revenue from a Metlox profit participation program, which ends this year.
However, Moe noted that a number of revenue sources have nearly dried up and other factors have cut deeper into the city’s general fund, 70 percent of which goes toward labor costs.
Most notably, property taxes have declined dramatically after years of nearly double-digit growth. Property tax revenue accounted for 39 percent of last year’s general fund. The city estimates a 2.1 percent decrease this year. The threat of a state takeaway of property taxes also looms. Last year, the city recovered $1.8 million in property taxes, forcibly loaned to the state.
“When your largest revenue source isn’t growing, obviously you’re going to have some problems,” Moe said.
The city also anticipates, in coming years, severe losses in investments in the California Public Employee Retirement System (CalPERS). Returns originally assumed to earn 7.75 percent took a dramatic nosedive — to negative 24 percent in the 2008-09 fiscal year. The resulting increased pension payments could cost the city $1.5 million over the next five years. Moe suggested correcting the long-term pension problem with employee contributions and a two-tiered, employee pay structure. Renegotiations with all three labor union agreements — police, fire and teamsters – are scheduled for next year.
Additionally, revenue earmarked for certain programs have not kept up with the expansion of services. The on-going needs for subsidies have tapped heavily into the city’s general fund. Prop “A” monies, which fund the city’s Dial-A-Ride program, will be deficient by $35,000 next year and $140,000 the following year, according to Moe. The city has yet to be reimbursed for an annual $400,000 subsidy to the Storm Water Fund and a $196,458 deficit to the Street Lighting and Landscape Fund is expected to grow larger in coming years.
While workers compensation claims — some dating back 20 years — are expected to decrease next year, Moe said that an unpredictable change in status of three current claims against the city could easily increase costs by hundreds of thousands of dollars.
Financial contributions to the Manhattan Beach Unified School District, which totaled $1.82 million over the past two years were not included in this year’s proposed budget.
Changes implemented last year, such as the suspension of raises after contracts expired, allowed the city to reduce a projected $16 million deficit over the next five years to a $4.6 million deficit.
The city will hold a special public meeting at 6 p.m. Tuesday at the Police/Fire Station to review the Parks and Recreation, Fire, and Finance departments’ budgets. The proposed budget will undergo a final review at the June 1 City Council meeting. A public hearing and final adoption of both the proposed budget and the city’s capital improvement plan will take place June 15.
“It’s going to be a slow economic recovery,” Moe said. “Bumpy and unpredictable.” ER