Newer Cities Stung by Budget Cutbacks : * Recession Delivers a Wake-Up Call to Mission Viejo

In cities all around the country hurt by the recession, where layoffs and budget cuts had driven a spike into the heart of the best-laid plans of municipal government in the 1980s, the refrain had become all too familiar. And this report sounded like many of them when it said its subject city faced a “fiscal crisis . . . and must take dramatic action to reverse current trends to avoid the future substantial reduction or elimination of city programs and services.”

A number of our older cities in Orange County had been through this drill already, with cutbacks contemplated and special taxes or user fees enacted to bridge the budgetary gap. But there was something different this time: the city in question was only a few years old. And for Mission Viejo, a shining new suburban community in the southern part of Orange County, it was an inaugural wake-up call to the special burdens of local governance, delivered by a consultant predicting that the city could have a budget deficit by as early as next year.

This news was visited upon a city that only two years ago was so flush with cash that it was thinking about giving some of its $20 million in reserves back to the taxpayers as rebates.

The favorable budgetary climate was made possible under a state law granting tax breaks to help new cities get started. Wisely, the city saw the other revenue-strapped cities around the county with cut programs, and it has earmarked the money for city projects. But somehow, that did not change the overall shock now.

The city is debating just how tough the climate is, whether in fact the reserve would be drained in five years and the deficit visited next year, or whether there was time until 1995, when the deficit would arrive. But whether the glass is half-empty or almost entirely empty, there are lessons for new communities in the realities of fiscal planning.

Irvine, for example, a growing community, has been socked by the recession with huge shortfalls in projected sales tax revenue and development fees. Though few would quarrel seriously with its quality of local government, it finds it has faced the prospect of losing as many as 71 municipal workers and is scheduled to consider the question early next year. Only in October, the City Council agreed to lay off six workers after revenue fell short.

What we are seeing in these shifts is the down side of the boom psychology, which prevailed for a time in parts of Orange County. It is an example of the entire region’s day of reckoning with the recession, which first hit hard in other parts of the country and for a while seemed to leave others immune.

For the newer communities, just as for the older ones such as Anaheim that wrestled with budget problems a little earlier, there is a time to receive the benefits of growth, and a time to tighten belts.

What it will mean is tough choices that some of the newer communities are not used to making.

Mission Viejo, for example, looks at the possibility of selling or leasing its recreation centers, even as money from its general fund and reserves has gone for such projects as an animal control shelter, land for a library and a soccer training field. Irvine is looking at how best to eliminate positions so as to keep senior people.

Finally, some of these cities are really having to reckon for the first time with the need for battening down the hatches. How different the climate is from only a few years ago, when Orange County seemed immune to the difficulties being faced by municipalities elsewhere.