HUNTINGTON BEACH : Budget Gap to Be Focus for Council

How the city can avert a $2.2-million budget shortfall this year will be discussed at Tuesday night’s City Council meeting.

City Administrator Michael T. Uberuaga has advised council members that the recession and actions by the state have greatly reduced expected city revenue.

The state, struggling to balance its own budget, last fall took a big bite out of cities’ budgets by keeping funds that once were earmarked for local governments. The recession has prompted less consumer spending and thus reduced sales-tax income. The property tax has also fallen somewhat because of reduced property values.

In a memo to council members, Uberuaga said the city will be $2.2 million in the red by the end of the fiscal year July 1, unless changes are made. He recommended that the council approve these proposals:

* Divert $1.5 million from the city’s waterworks income to the general fund, which pays for the bulk of government costs. Uberuaga said the water fund is expected to have a $2-million surplus this year, and the diversion of funds will not adversely affect water operations.

* Instruct city officials to reduce spending by up to $700,000 by June 30. Uberuaga said most of the reduction could be accomplished through a hiring freeze.

As an added precaution, Uberuaga asked the council to authorize use of up to $400,000 in city reserve funds. That “rainy day” money would only be spent, however, if the budget shortfall is greater than $2.2 million, or if the city’s spending reductions fall below $700,000 between now and June 30.

Uberuaga’s memo said there may be hopeful economic signs when the state in late March discloses how much sales tax came in during the past Christmas season. Some economic analysts predicted in December that consumer spending was running higher and that the 1992 Christmas season would show a spurt in sales tax income. Part of the sales tax goes to city governments.

“Revenue and expenditure estimates are still subject to change,” Uberuaga said. “While the economic picture could get worse, hopefully there will be a positive economic upturn.”