City Expects 'Modest' Deficit in Next Year's Budget

The city is expecting another deficit in next year’s budget but, for the first time in seven years, no city employees will have to worry about losing their jobs.

That information was revealed last week during two study sessions in which city staff gave reports to the City Council on what to expect for next year’s financial operations.

The holdout in the state Legislature over Gov. Jerry Brown’s proposed budget plan also could play a significant factor in the city’s operations. But if the city is able to at least hold the line on its projected budget for fiscal year 2011, City Manager Connie Jackson said she anticipates only a modest impact because revenues look promising.

"Although the city continues to experience significant fiscal challenges, improvement in projected revenues offers some relief," Jackson said in a budget report to the council.

Revenues for next fiscal year are expected to be $31.8 million, a 1.4 percent increase from this year's revenues. The city was also able to end the year by significantly reducing its $900,000 budget deficit from this fiscal year, largely because of increased revenue from sales taxes, business taxes and hotel and motel taxes. However, expenditures are expected to be $32.2 million, a 2.6 percent increase from this year's spending, which is projected to leave the city’s general fund with a $322,571 deficit.

The budget report said the primary reason for the increase in spending is a result of rates increasing to pay for employee retirement benefits. Like this year, the report said, those costs will be offset by requiring more furloughs and salary reductions throughout next year.

Although significant cuts have been minimized, continuing difficulties in the state budget will still have an impact on services, Jackson said. The city is anticipating losing $100,000 from the state Community Oriented Policing Services program, which has normally been used to fund a traffic officer. The city won't know if that position will have to be cut until the state passes its budget.

The city is also expecting to lose $37,000 from the state library fund, which was being used as seed money to eventually build a new library.

Brown's proposal to throughout the state is also still up in the air, and Jackson said it is still not clear what could happen to the city's redevelopment agency.

One cost that could have had a significant impact on the city’s budget—the cost of paying for all the city’s recovery efforts following the Sept. 9 pipeline explosion in the Crestmoor neighborhood—won’t have any impact after all.

According to the budget report, the city won’t have to worry about paying a dime because those costs will be covered by three main sources: the California Emergency Management Agency, the city's property insurance through the Association of Bay Area Governments and a established by PG&E to cover costs associated with the response to the disaster.

"From a financial perspective, the city has not, and is not expecting to experience impact to the general fund or to the enterprise funds," Jackson said in the report.

The council will be holding a public hearing on the budget during its at 7 p.m.