Irvine votes to increase reserves

Putting a finishing touch on the plan the city of Irvine used to weather the recession, the City Council voted unanimously Tuesday to increase its goal for future financial reserves by about $7 million.

Irvine leaned on its contingency reserves during tough times but was able to refill them after the 2010-11 fiscal year. Now it intends to increase the emergency money from 15% of its general fund to 20%.

"We outpaced our worst fears," City Manager Sean Joyce told the council Tuesday as he presented a final wrap-up of the $136-million budget from fiscal year 2011-12, the last step of the three-year plan Irvine instituted to make it through the economic downturn.

He also looked back on how the city managed relatively comfortably while some California cities fought bankruptcy.

In the first year of the recession, Irvine lost $16 million in revenue from its top three sources: sales, property and hotel taxes.

In response, the city instituted the Bridge Plan, which was built on four principles: no new taxes, no reductions in core services, no employee pay raises and no layoffs of public employees.

Through cost-savings mostly in contract services and overtime, Irvine brought its annual per-capita expenses to the lowest levels since the city began keeping records — spending just more than $600 per resident in the last two fiscal years, Joyce said.

Those savings, and a boost in sales tax revenue, let the city use a budget surplus to refill its reserve fund, which totaled about $20 million, and dole out $450,000 in bonuses to city employees at the end of the 2010-11 fiscal year.

The decision to increase reserves came as part of deliberations about what to do with $9.3 million left over from last fiscal year's general fund.

Some will go toward unpaid expenses and obligations. The council also decided $2.4 million will head to a self-insurance fund, $1.9 million will go to future infrastructure repairs like street repaving, and $1.3 million will fund public facility improvements.

The change to the reserves is so far only a goal intended to be met over the next three fiscal years.

When asked by Councilman Jeffrey Lalloway if it's a reasonable hurdle without major cuts to services, Joyce responded, "I don't think one should blindly follow it, but increasing our reserves when we're as dependent as we are on sales tax is wise."

Council members took turns praising staff's cost controls and the city's foresight in keeping a reserve — and actually using it.

"We're emerging from this recessionary period in an exceptionally strong position" Councilman Larry Agran said. "And I am pleased that we took the step to deploy the rainy-day reserves to do what I call ever-normal budgeting so that you can maintain stability, even in the tough years."

Agran added he hopes the reserve would be grown with the understanding that it should be used in hard economic times.

"There's not much point in having a rainy-day reserve if you're not ready to deploy it when it's raining," he said.

Twitter: @jeremiahdobruck

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