City cuts will have to be made
City Hall’s economic forecast is not as bleak as it was a year ago, but dark clouds are still on the horizon.
While last year’s $16 million budget shortfall may appear to dwarf this year’s $4 million deficit, economic uncertainty will remain a lingering problem for city officials in the foreseeable future.
“We are still not out of the woods,” said Steve Stark, the city’s finance director, during the City Council’s mid-term budget review on Tuesday. “We continue to have challenges with state funding for local communities.”
“We continue to have challenges with state funding for local communities.” — — STEVE STARK Finance director, City of Santa Monica
The City Council succeeded in closing its deficit last year by cutting $8 million in expenditures and finding another $8 million worth of revenue, which came in the form of increased parking fines and business license fees, among others.
“Those were hard decisions to make, but it created a much improved picture,” Stark told the council. “That picture would have been much more bleak had you not made those policy decisions.”
But because of the state’s ongoing budget problems, Santa Monica will be forced to deal with a loss of revenue stemming from sources like the Vehicle License Fee. Stark predicts Santa Monica’s budget deficit for 2005-2006 will swell to $5.6 million if no corrective measures are taken.
While current estimates indicate that the gap is narrowing, it is believed that the shortfall will extend several years beyond the original estimate of three years.
Santa Monica is currently bracing for Gov. Arnold Schwarzenegger’s proposed budget, which is expected to take away local revenues. The state budget, as proposed, will divert local property tax revenue away in order to meet California’s Prop. 98 responsibility to fund public education. At a minimum, Santa Monica will lose $775,000 in property taxes to the general fund and $1.6 million to the Redevelopment Agency, which was created to rebuild the city following the 1994 Northridge earthquake.
Ironically, as the state shifts revenue from the city to benefit schools, there is a local attempt to mandate City Hall to give a minimum of $6 million every year to the district.
In true City Hall fashion, the finance department has suggested that it can actually lower the deficit by spending more money. Stark said City Hall saved $5.7 in one-time funds in its capital improvement budget last year. He suggested to the council that it spend that money on improvements to the Santa Monica Pier, a project that is estimated to cost $6 million. Stark suggests this would eliminate the need for ongoing revenues to pay for the multi-year expense and enable City Hall to shave $2 million off the budget shortfall.
As City Council began brainstorming for ways to close the deficit, it found itself in a familiar position this time of year — listening for hours to members of the public who pleaded to keep funding in place for their pet programs.
More than 60 people spoke to the council, asking for money from everything to the historical society to the symphony to playgrounds to more school funding to the arts.
Afterward, each council member laid out his or her priorities for the upcoming year, making it clear that not everything is going to get funded.
“We have to think about what we can do with what we have,” said Councilman Kevin McKeown. “The state isn’t there to help us so we have to do it ourselves.”
Originally published in the Santa Monica Daily Press print edition on January 29, 2004. Read the original PDF.