Big budget gap expected again

CITY HALL — The level of budget cutting next year may be much as it was this year, city officials told the City Council on Tuesday, with city revenue sliding into what could be an $8-million budget shortfall.

The same economic recession that pushed down city revenue in the first quarter was expected to continue through the fiscal year and cramp City Hall as it prepares to draw up another budget plan for next fiscal year.

The forecasts were based on the city’s first-quarter reporting period of July 1 to Sept. 30 — “a sleeper” report in years past, City Manager Jim Starbird said.

“This year, however, is shaping up to be something unlike anything we’ve faced in a long, long time,” Starbird said.

In bridging a $9.9-million gap for this fiscal year’s budget, the City Council cut the equivalent of 5% from almost all the city’s departments. Those cuts translated into the loss of 42 city employee positions, sworn police officers, reduced library hours and other service reductions.

Any measures taken to raise revenue and cut costs now would hopefully keep a sluggish economy from ripping a similar gap into the budget for next fiscal year, city officials said.

Facing another untenable round of budget cuts in an election year drew a heated response from some on the dais after Councilman Bob Yousefian, who will be up for reelection in April, again held up his lone June protest vote on the city’s $750.3-million budget, a week after he voted to support the cuts that balanced the books.

“I said this may be coming,” Yousefian said, adding that he thought the budget gap could be as high as $12 million next year.

“The campaign hasn’t started, so ‘I told you so’ in regards to what?” Councilman Frank Quintero challenged.

Council members pointed out that Yousefian voted for the same employee union contracts and budget measures as the rest of the council, a point Yousefian denied.

The findings also drew out a recurring group of City Hall activists who criticized what they said was a high number of city employees, their union contracts and untempered spending.

But Councilman Ara Najarian, who with Quintero also faces reelection, disputed those assertions.

“It’s disingenuous to say ‘I told you so.’ No one’s clairvoyant up there,” he said.

Mayor John Drayman also reminded Yousefian that all decisions were made based on the financial data presented at the time.

“Things change,” he said.

The council has taken interim steps, such as voting to increase library user fees last month to supplement the $425,000 cut from the library department’s budget this year.

In October, the council heard preliminary options for increasing city revenue, including a business license tax, raising overnight hotel visitor taxes and even creating special assessment districts, where taxes would be designated for specific expenditures.

And over the past several weeks, City Council members have scrutinized outside contracts with private firms more closely for possible savings.

But city officials have conceded that those measures will not be enough to avoid yet another round of heavy cuts.

Sales tax revenue — especially for new vehicle sales — have fallen 23% compared with the same period last year, according to a city report released last month.

Licensing and permit fee revenue has also fallen, city officials said.

And as state lawmakers work to rein in a crushing budget deficit, they could opt to borrow up to 8% of local property tax revenues.

“How that will impact us, we don’t know yet,” Finance Director Bob Elliot said.

The recent liquidation of Linens ’N Things and Mervyn’s has been tempered somewhat by the Americana at Brand and Glendale Galleria, especially amid the holiday shopping season.

Property valuations were also up 4%, with foreclosures affecting less than 1% of the city’s entire housing stock, the report found.

 JASON WELLS covers City Hall. He may be reached at (818) 637-3235 or by e-mail at jason.wells@latimes.com.