City Mgr. & Somber Mayor Unveil Proposed '03 Budget, Warn Of Ballooning Gap Between City Hall Spending And Revenue
Mayor Calls Situation "Alarming," Proposes Reexamination Of City Hall Budget Process
We Post City Manager's FY 2003 Budget Message, and Mayor's Written Recommendations Online
(August 16, 2002) -- City Hall spending that is expected to exceed revenues -- this time by roughly $46 million and using one time revenue sources to balance out the red ink -- has created a situation Mayor Beverly O'Neill repeatedly described as "alarming" as she and City Manager Henry Taboada released LB City Hall's proposed FY '03 budget.
Flanked by City Manager Taboada at an August 15 City Hall news conference, Mayor O'Neill urged the equivalent of across the board budget reductions -- including public safety budgets -- along with a potentially sweeping reexamination of the way City Hall does its budgeting.
Councilmembers will ultimately decide how to deal with the budget, including the extent to which City Hall will (as in previous years) use one-time resources to maintain current spending. City management and the Mayor said the gap between City Hall spending and revenue (the "deficit") is significantly higher now than in past years...and growing.
City Manager Henry Taboada attributed much of the budget situation to the voter approved utility tax reduction, which he said has reduced City Hall revenue by $21 million from the former 10% UUT level.
Mr. Taboada also noted lower sales tax and hotel room tax, expiring federal COPS grants and other funding obligations had contributed to the problem. We post the City Manager's 2003 Budget Message in pdf form on a link below (without attachments for now).
In late Sept. 2001, Councilmembers voted to enact a budget using revenue assumptions understandably prepared before Sept 11. However, unlike some other cities, LB Councilmembers did not subsequently revisit the pre-Sept. 11 budget assumptions after Sept. 11.
In response to a question by LBReport.com asking the Mayor whether the Council should have re-examined the budget three months ago when city management advised of the growing deficit, Mayor O'Neill said:
"It's probably a year late if not three months. I feel some responsibility in that myself."
City Manager Taboada's proposed budget includes a 2% cut in General Fund spending (excluding sworn salaries and certain fixed costs) amounting to approximately $3.3 million accomplished mainly through salary savings.
Mayor O'Neill's budget recommendations to the Council propose (among other things) reducing City Hall spending by 3% in all City Hall depts. including public safety. "I'm not talking about losing employees. I'm not talking about anyone losing their job. I'm talking about deferred spending, deferral of purchases, review of programs that are going on," the Mayor said.
She noted that applying a 3% reduction to all departments including public safety would save $9.6 million (but only $5.4 million if public safety were spared the cuts).
Mayor O'Neill, visibly concerned, said: "The City Manager has presented to us a balanced budget. However how it is balanced is, to me, alarming. We cannot budget our balance on one time reserves and it is incumbent on the City Manager to present a balanced budget, but the gap between revenue and expenditures is growing at an alarming rate. I don't think we can wait any longer to pay attention to this."
Mayor O'Neill added, "So I think we have to wake up to the fact that we have to face a strong look at our budget, what our expenditures are and what we can do to decrease this gap between revenue and expenditures. We never know what's going to happen in the future...We can't predict a lot of the things that happen. We would never have predicted 9-11 [Sept. 11] and all of these things that we can't predict we have to be prepared for."
The Mayor continued:
When you look at [a deficit of] $46 million, it's just so alarming to think that we are going to try to figure out how to find $46 million, mainly in one time monies, to balance this budget, and it's getting worse...So I think our current fiscal policy, our budgeting approach, is no longer an option and we have to change the way we are doing business if we want to remain fiscally solvent.
And I think the thing that alarms me...is that we would deplete emergency reserves if we don't do something about this. Emergency reserves were a policy by the Council which said we would have 10% of our General Fund budget and we finally have reached that point...If at the end of this year we don't do something about this gap, this is in jeopardy. And what do we do when we face an emergency?
And the thought of losing this, I mean, the minor point is that we probably would lose our credit rating but the biggest thing is that we would have nothing to sustain us in an emergency. And we cannot run a city unless we have something that gives us some comfort in knowing that we have an emergency fund.
The Mayor added, "We have to take a broader look at the budget of this city rather than individual programs to know that we're facing a situation, if we don't rectify [it] could bankrupt us. You cannot have the gap that we have that is increasing each year without knowing what's going to happen in the future."
At the same time, the Mayor said she remains optimistic about the city.
"I think that we're in a situation that's not going to last forever...[if we do something about it.] And so I have cautious optimism and, as you know, I try to always feel optimistic about the future. I still do. I think that this city has got the potential like no other city that I know, and we are facing some of the things that other cities are facing, but we at least have a light at the end of the tunnel. Right now, unless we do something about our situation immediately, we'll never reach the light."
The Mayor added, "I think that in two to three years, we will be out of this slump that we're in right now and have a stable revenue stream that we have been working on for a long time..."
We post the Mayor's written budget recommendations verbatim on a link below.
City Manager Taboada added, "Everything the Mayor came up with, she came up with independent of our [city management] process. We only met yesterday to really dovetail the two together. And it's amazing the amount of synergy there is between the two independent processes. Not that we haven't talked with one another, we just have not exchanges factual hard data to deal with the situation at hand."
The City Manager's proposed budget, with the Mayor's support, adds 11 new police officers (10 officers + 1 sergeant; 1 add'l new transit officer has already been added). However, the budget doesn't start them until June 2003, meaning the 10 recruits would presumably graduate from the Police Academy as sworn in Dec. 2003, thus falling under the FY '04 budget.
That would bring LB to 925.25 officers, a per capita level of roughly 1.96 sworn officers per thousand residents (using LB's most recent population update from CA's Dept. of Finance: 473,100).
City Manager Taboada acknowledged the new officers scheduled for mid-2003 (sworn by Dec. 2003) are fewer than the number already shifted to handle security at the Port and Airport. However, the City Manager indicated City Hall is maintaining neighborhood police service levels by using overtime.
The City Manager, also with Mayoral support, proposes giving the Public Corporation for the Arts $1.75 million in FY 2003 (the record amount budgeted by the Council in 2001 after Sept. 11), although the money (as in past years) is not entirely from the General Fund...and in FY 2003, the City Manager proposes that PCA take responsibility for funding LB's Muni Band concerts ($350,000).
And so-called Council "discretionary funds" are gone.
However, the City Council -- not the City Manager or the Mayor -- has the last word on the budget. After holding public Council hearings (scheduled in the coming weeks), the Council will discuss, possibly modify and then enact a budget (usually a mixture of City Manager, Mayor and Council recommendations). If it doesn't, the budget proposed by the City Manager goes into effect.
The Council is free to modify City Hall's budget after Sept. 30 by voted action. City Manager Taboada indicated that he favors re-opening the budget after November 2002 if there are state budget impacts affecting LB.
To view the City Manager's FY 2003 Budget Message in pdf form (20 pages, roughly 1.75 MB without attachments), click on City Manager's FY 2003 Budget Message.
To view Mayor O'Neill's recommendations re proposed budget, click on Mayor O'Neill's Recommendations re Proposed Budget.