Oceanside Deficit Forecast Catches Council Off Guard

After initially rosy fiscal forecasts, Oceanside now faces a potential $5.8-million budget deficit, a hiring freeze and a 12% citywide spending cut.

Grim City Council members said Wednesday they had been misled about the city’s poor fiscal condition.

“I feel the (city) staff, maybe through intimidation, may not have given us the full story,” Mayor Larry Bagley said.

Councilwoman Melba Bishop remarked, “I’m sorry, but at some point we weren’t given the truth here at this podium.”

San Diego County’s third-largest city immediately began a hiring freeze and city departments were ordered to cut spending by 12% to offset the expected maximum $5.8-million shortage in the city’s $227-million budget for fiscal year 1990-91.

City officials blamed unexpected economic events, including the housing slump that slowed local development and the Middle East buildup that’s drawing thousands of Marines to the Persian Gulf and away from the local economy.

“Who could predict a Middle East crisis that’s taken military personnel out of this area?” asked City Manager Jim Turner. The Marine deployment has stunted sales tax revenue in Oceanside, although exact figures aren’t available yet.

More significantly, the soft housing market has denied revenue the city expected from planning, building and engineering fees generated by residential development.

Those fees were down 54.7% from the first quarter of this fiscal period over the same period last year--a difference of $889,000 from the $1.96 million in 1989-90.

Similarly, the fees developers pay for roads, water and sewer lines fell by 83.6% because of the lull in Oceanside’s residential building. The first quarter of this fiscal year yielded only $232,000 in developer fees, way down from $1.4 million the same period last year.

Also, the city has lost $1 million from federal revenue sharing cuts and has been affected by a state prohibition on putting interest earned on developer fees into the general fund.

Assessing the total revenue drop, city Financial Management Director Carl Husby said, “The impact on services, obviously, is rather extensive.” But, he said, the city’s $90 million in investments is secure.

It hasn’t been decided yet what city services will be curtailed under a 12% across-the-board spending cut, but Bagley said layoffs in the city’s 954-person work force are unlikely.

Yet it was clear Wednesday that Oceanside’s predicament was largely caused by heavy spending and a beginning budget balance that was grossly overestimated when the new fiscal year began.

A financial report said that, since 1984-85, about $10 million has been shifted from the general fund to the city’s redevelopment agency and to support construction of the $30 million, 133,000-square-foot Civic Center that opened last June.

Also, the cost of government has risen sharply since 1988-89, according to the report.

Police and fire budgets have increased by $5.8 million and $2.4 million, respectively, while the community development budget went up $1.8 million.

The report was unveiled a week after a City Council election campaign that included allegations that the city was overspending. One candidate, Nancy York, who won, had criticized the $1 million spent for two police helicopters, tartly calling them “toys for boys.”

Bishop called for a detailed report on police, fire and other departmental expenditures. She also wanted an accounting of fees paid by developers. “Did we subsidize community development or collect what it costs” to serve growth? she asked.

Although the council seemed to accept the unexpected changes in the economy, some members were openly annoyed over the rosy fiscal forecast when the budget was crafted last summer.

Bagley faulted the city staff for insisting that Oceanside had a $5-million or $6-million beginning balance when the actual sum was a fraction of that.

“One thing that has shocked me the most today is to hear the beginning balance we were told about at the beginning simply was not there,” Bagley said.

“All of the sudden, it was less than $1 million,” Bishop said. “I kept being told it was $5 million.”

But the mayor speculated that the staff may have failed to adequately reveal the city’s actual budget because of departmental political pressure or fear of some council members.

“I think we relied on staff too much,” said Bagley, observing that “there are politics within politics within politics in the city.”

Councilwoman Lucy Chavez exhorted the council to consider hiring an independent budget analyst to advise the council and avoid the distortions of internal political squabbles.

“There’s something that fell between the cracks here” in apprising the council of the city’s fiscal situation, Chavez said.

One council member said privately that it’s unlikely that city administrators will be punished for the budget predicament, and none was singled out for criticism Wednesday.

City Manager Turner, a 29-year city employee, took over the post in September, after the budget was in place and City Manager Ronald Bradley had quit in frustration over political attacks from some council members.