SAN JUAN CAPISTRANO : Midyear Budget Outlook Not Good

Like many other Orange County cities, San Juan Capistrano is facing a midyear budget crunch that could result in reductions in some city services and possibly even layoffs, a city official said.

The city’s greatest budget problem stems from “substantial reductions in sales-tax revenues,” said George Scarborough, assistant city manager. Scarborough is preparing the midyear budget report, an item the city staff presents to the council annually in January, the halfway point in the fiscal year.

Three full-time city positions were cut last year, the first time the city had experienced layoffs in 10 years. Scarborough said layoffs this year are “unlikely,” but he did not rule them out.

City Councilman Kenneth E. Friess would not rule out layoffs either, but he said the prospect was remote.

“The current council will do everything in our power to prevent any layoffs,” Friess said. “Before we even considered any layoffs, we would get very creative and find other ways to cut back.”

Scarborough said, however, that revenue shortfalls have already shown up in preliminary budget figures.

“We are experiencing shortfalls of about $125,000 from our projections of sales-tax (income) and the revenues we get from the state, such as (from) cigarette taxes,” Scarborough said.

Cigarette tax revenues passed down from the state this year “are about half what we normally get,” he said.

Sales taxes, which represent “just under 30%” of the revenues that make up the $11-million general fund budget, have shown the largest drop from projections, Scarborough said. The Price Club and the city’s four car dealerships make up a sizable portion of the sales-tax revenue, Scarborough said.

Overall, however, Scarborough portrayed the city as better off financially than last year at the same time. This year, the city was prepared for the recession and therefore lowered its revenue projections.

Last year, city losses came from an unexpected drop in fees from development, he said. The city was forced to live with nearly $1 million in lost revenues.

“Last year our biggest problem was the death of the construction industry and the falling off of that revenue,” Scarborough said. “We went into this year with a much better assessment of our projected revenue situation.”