There may be no fireworks in Laguna on the Fourth of July next year, but city officials are expecting an eruption when spending is cut to balance the 2009-10 budget.
City Manager Ken Frank laid it on the bottom line Tuesday at the annual Budget Workshop: The city will begin the next fiscal year with a $5 million surplus, but expenditures must be slashed by about $600,000 in salaries, services or programs to balance the sharp decline in revenue.
“People will be screaming,” said Frank, who submitted — for the first time — a draft budget for the council to consider that was not balanced.
“I did not have the heart or the time to balance it yet,” Frank said.
Frank will review the draft and propose cuts before the June 30 deadline to adopt a balanced budget, as required by law.
“I am always amazed at what a great job Ken Frank does at keeping us going,” said Martha Lydick, president of the Laguna Beach Taxpayers Assn.
He has his job cut out for him — and it would be even harder if he not the foresight last year to recommend a “Recession Smoothing Account,” that will be kept intact probably through 2009-10 fiscal year.
The draft budget is $2 million out of whack for 2009-10, and it will only get worse unless there is a dramatic and sooner-than-expected turnaround in the national economy, Frank told a grim council.
He cited the reduction in revenue — a 14% drop in bed taxes, 18% in sales taxes and at least 6.8% in property taxes from the 2007-08 fiscal year, and existing labor contracts with built-in future raises as contributing factors for the projected deficits.
“We could be $6 million in the hole in July of 2012,” Frank told a grim City Council. “We need to boost income or cut costs.
“I can say for sure there will be fewer city employees than there are now unless the economy makes unanticipated rebound.”
Frank will be meeting with union representatives to court support for modifications to future employee compensation or benefits rather than cuts.
“We are talking to the unions that will talk to us,” Frank said.
The proposed budget already includes the elimination of two staff positions, one in the Planning Department and one in Street Maintenance.
Mayor Pro Tem Elizabeth Pearson and Councilwoman Jane Egly volunteered to take a pay cut, not echoed by the other council members.
“If we ask employees to forgo a raise, we should too,” Egly said. “But we are talking nickels and dimes.”
In addition to the deficit, the budget doesn’t even include programs previously approved by the council, such as web streaming software for council meetings, television coverage of Planning Commission meetings, the winter homeless shelters, video technology for the police radar trailer and three more downtown sidewalk steam cleanings.
“And I haven’t even started on the Climate Control Plan,” Frank said.
There is not enough money to complete the Nyes Place sidewalk project unless the city’s estimate of the costs is wrong and architect Morris Skenderian’s is right. The city Sewer Division is tapped out.
“We had fun and spent $10 million on major improvements,” Frank said.
But now there is no money for the decrepit Main Beach Lift Station that is proposed for relocation in conjunction with the new Lifeguard Headquarters, which could delay the project.
The state economic crisis has put the $2.5 million Heisler Park grant on hold, although not rescinded.
Frank will consider council priorities in making the cuts.
“If there are some things vitally important to you that are unfunded, let me know,” Frank said. “I’ll put them in the budget and take something else out.”
Councilwoman Toni Iseman favors the web streaming software that benefits residents, especially those who have Direct TV and do not get the telecasts of the City Council meetings.
Councilwoman Verna Rollinger doesn’t think the cold weather shelters will break the bank.
Egly said with the exception of the proposed $100,000 expenditure for smart irrigation sensors, which could reduce the city’s water use and bill, she could live without any of the unfunded projects for the time being.
“We have two categories of expenditures: the ‘gotta’ have and the nice to have,” Pearson said.
The annual Fourth of July Fireworks falls into the nice to have, she said.
The pyrotechnics cost $20,000, but the real expense is crowd control and cleanup.
However, the contract is already signed for this year.
“Charge the visitors $5 to defray the costs, but don’t give away our national celebration,” Lydick said. “I felt there were a lot of other projects that could be put off indefinitely that would hurt people the least — like web streaming. It wouldn’t hurt people to come into City Hall and listen to the tapes or read the minutes. “
Lydick was one of only six members of the public to attend the workshop.
“This was the most important meeting of the year and hardly anyone from the public was there,” Pearson lamented.
Design Review Task Force Chair Matt Lawson praised the council and the city manager for their prudence.
“I take pride in the fact that the city manager and the council have done as much as possible to behave in a financially responsible way, particularly in contrast to what we see on the state and federal level,” Lawson said.
The draft budget is posted on the city’s website, www.lagunabeachcity.net.
Copies are also available for review in the City Clerk’s Office at City Hall and at the Laguna Beach Library.