Shortfall gets slimmer CITY HALL GETS CREATIVE
CITY HALL — Now halfway through the slashing phase of next year’s budget, city officials will soon have to grapple with what to cut without seriously affecting the services that the public relies upon.
This will be the third consecutive year of budget deficits within City Hall — totaling $28 million. City Hall in 2002 faced an $8 million shortfall, and was able to cut $2.2 million in operating costs and $6.6 million in capital improvement projects. In 2003, City Hall plugged a $16 million shortfall by cutting expenses and increasing revenues. Thirty-one positions were eliminated within City Hall as part of the cuts.
“It hurt, when people left (positions) that weren’t filled and won’t be,” said City Hall spokeswoman Judy Rambeau, adding that there’s been a hiring freeze city-wide since 2002, as well as a hold on all cost of living increases for office supplies and expenses in every department. “After a while, you have to look at all of this together.”
This year, City Hall faces a $4 million deficit. Officials have a pretty good handle on how to make up the difference — shave $2 million in operating costs within various departments at City Hall and take $2 million out of the capital improvement projects budget. Nineteen positions within City Hall have been identified that could be eliminated if more cuts need to be made, Rambeau said.
“Year after year of cutting, it starts to make an impact,” said City Finance Director Steve Stark.
The City Council held a public hearing in January during the mid-term review of the budget, which was laid out by Stark. Council members gave a general list of their priorities — with most saying vital services like police and fire had to remain at current levels — and sent staffers to work on how to close the gap.
Department heads last week submitted their proposed budgets to City Manager Susan McCarthy, who gave them a target figure to obtain based on the council’s direction. She will then review them, tweak where necessary and prepare a proposed budget for the council to examine in full in May. The council will then hold a series of public work study sessions and pass a final budget by July.
Cutting the capital improvement projects budget this year took a bit of what financial wizards call “creative financing.” In essence, City Hall will spend $6.6 million to overhaul the Santa Monica Pier in order to save money. Sound confusing? It is, said Stark.
As the fiscal year for 2002-2003 ended, City Hall found itself with $5.7 million in savings through complicated budget adjustments. The city changed auditors and the new firm found $2.3 million in savings by modifying some investment income from accrual accounting to cash-basis accounting. Other adjustments accounted for $3.4 million.
“It’s a timing issue,” Stark said. “On the books, it created additional revenue.”
The difference of the pier project’s cost of $6.6 million from the $5.7 million in savings, which accounts for $1.9 million, will be taken out of this year’s capital improvement projects fund. And for the next four years, the $2 million annually budgeted for the pier won’t be needed, thus shaving the budgeted $12 million toward capital improvements to $10 million.
The good news for City Hall is that its projected shortfalls continue downward. For 2005-2006, it’s predicted to be a $1.6 million deficit, Stark said. And despite that City Hall budgets conservatively and operates on a five-year forecast conducted by a slew of economists, Santa Monica’s economic future depends in part on what happens with the state budget. Municipalities rely on revenue from the state in the form of local property tax revenue and contributions to the Redevelopment Agency, which was created to rebuild the city after the 1994 Northridge earthquake. It also relies on revenue from the vehicle license fees.
“At the end of the year, the state will be in a better position but an optimistic budget doesn’t change their future because deficits will continue to go up,” Stark said, adding the state budget still will have record shortfalls well into the billions of dollars for the next several years.
Originally published in the Santa Monica Daily Press print edition on March 22, 2004. Read the original PDF.