City’s budget gap compared to others’
As the City Council prepares to close a $9.7-million budget gap before July 1, similar cities throughout the state are confronting their own economic demons, all them attributable to massive drop-offs in property- and sales-tax revenues.
But the size of those demons varies, and in an analysis of six other cities, Glendale’s is relatively mild.
At a time when Glendale is flinching at program cuts and a handful of possible layoffs, cities such as Modesto and Chula Vista are in the process of cutting a combined 107 workers from their rolls, while Irvine is planning to dip into its reserves.
Nearly all of the cities have instituted, or are considering, a mix of across-the-board-departmental cuts, wage concessions, early retirement, layoffs, furloughs and use of reserve funds to balance significant budget gaps before the start of the new fiscal year on July 1, city officials said.
Mayor Frank Quintero said the assessment at a recent League of California Cities was relatively bleak. “The general consensus was that they were in dire straits and were having to make severe cuts to their workforce and services,” he said. “In Glendale, while things are very difficult, we are in much better shape than most of the other cities.”
Status and causes of the deficits
Of six California cities analyzed for this report — Irvine, Modesto, Santa Clarita, Pasadena, Chula Vista and Burbank, all in similar size to Glendale and located throughout the state — only Santa Clarita escaped a budget gap. Pasadena and Burbank had slightly lower deficits of $8 million and $7.2 million, respectively, compared with Glendale’s $9.7 million, but they are also significantly smaller. Burbank is nearly half the size of Glendale.
Similarly sized Modesto and Irvine saw shortfalls of $11 million and $14.8 million, respectively, while the slightly larger city of Chula Vista, which, at roughly 210,000 residents, is nearly identical in size to Glendale, is struggling to cope with a $20-million deficit.
Officials in Santa Clarita, which saw a slight decline in sales- and property-tax revenues, said the city escaped a budget deficit for the upcoming fiscal year’s $77-million general-fund budget thanks to a conservative spending record.
“Really, what we have done is a lot of work prior to the economy ever declining; that’s really helping us out,” City Manager Ken Pulskamp said. “We really take the approach that the decisions made in good times are more important than the ones made in bad times.”
Public Information Officer Gail Ortiz also attributed Santa Clarita’s balanced budget to a business-friendly environment. Despite the economy, two new shopping centers have been opened in the past year. The city also saw gains in revenue from television and movie filming.
Meanwhile, other cities are grappling with significant drops in sales- and property-tax revenue. For example, Modesto saw its sales tax drop more than 5%, and the median home price fell 50% percent in the last year, pummeling property-tax income, according to city budget documents.
While most cities across the state experienced some level of decreased property-tax revenue as a result of the limping housing market, Chula Vista was hit especially hard by the high foreclosure rate, ripping open a projected $20-million shortfall, said Maria Kachadoorian, the city’s finance director.
“A lot of the challenges we are facing is because we were one of the fastest-growing cities in the nation,” she said. “A lot of homes were purchased during sub-prime issues, so we have been affected by foreclosures pretty severely.”
Irvine, on the other hand, held steady on property-tax revenue, but income from sales and hotel taxes dropped significantly, contributing to the majority of the $11-million revenue shortfall, said Dave Tungate, budget and strategic planning manager for the city.
Gap-closing strategies
Like Glendale, most cities with gaps asked city departments to cut spending by at least 5%, through a mixed bag of strategies that included early retirement, freezing or eliminating vacant positions and reducing overtime. Even deficit-free Santa Clarita froze 20 vacant positions to hedge against potential economic downturns later this year.
On Tuesday, Burbank passed a balanced $77-million general-fund budget that included program cuts, hiring freezes and public service fee hikes to close a $7.2-million gap, avoiding layoffs or furloughs.
“In light of the overall financial situation in the state and nation, I think the budget that we adopted is a good one,” Councilman Dave Golonski said Tuesday. “I think the scope of our challenges on the economic front probably pale in comparison to the position that other cities are in right now.”
Pasadena also avoided layoffs, despite 10% across-the-board cuts that included police and fire, said city spokeswoman Ann Erdman. Officials there focused on reducing costs, including cutting back on printing, travel and training, while delaying the purchase of new vehicles. All of the city’s employee unions also made some sort of wage concession, including a 1% pay cut to firefighters, she said.
“In years past, the public safety departments, as is the case with most cities, were kind of sacred cows,” she said. “This year, it was actually those departments that really stepped up.”
Irvine has reduced expenditures as a preventive measure, but the majority of the budget shortfall will be met by using a portion of the city’s $30-million reserves, Tungate said.
“While actively looking to cut expenditures, the key preventive measure has been the City Council over the last several years building up its reserve fund in anticipation of a slowing economy,” Public Affairs Director Craig Reem said.
Despite eliminating numerous vacant positions and offering early retirement and voluntary separation incentives, the cities of Modesto and Chula Vista have both been forced to propose layoffs.
Many of Chula Vista’s cuts for the upcoming year have already been implemented, including the elimination of 40 full-time employees, split evenly between layoffs and early retirements.
Modesto will likely see an elimination of 67 full-time employees via the same formula.
To bridge the remaining $4.8-million gap, the proposed budget includes 96 hours — one day per month — of mandatory unpaid days off, or furloughs, for all nonessential city employees, according to city budget documents. Police officer and firefighter associations are currently in wage concession talks as well.
Effects and looking ahead
While city officials said that they tried to focus cuts on inefficiencies whenever possible, several acknowledged that layoffs or eliminating vacant positions would hamper public services.
“It has been pretty severe,” said Kachadoorian of Chula Vista.
“The council has had to make a lot of really tough choices.”
In a letter to constituents, Modesto Mayor Jim Ridenour acknowledged that many nonessential city services couldn’t be maintained amid such dire economic times.
“I have stated on many occasions that government cannot be all things to all people,” he wrote.
“The enormous loss of revenue and required reductions in service make this statement a reality.”
Cities with smaller deficits cited tough decisions, such as wage concessions, as strategies that helped to keep services intact.
“[The city manager] is doing everything he can to avoid any kind of layoffs or mandatory furloughs, which is another reason that some of these bargaining units stepped up,” said Erdman, Pasadena’s spokeswoman.
Irvine will likely see minimal effect to its public services because of the use of the city’s reserves, Reem said. In fact, the city’s proposed budget actually converts two civilian Police Department positions to sworn officers.
But no matter the local measures taken so far, officials have been keen to keep an eye on the crippling budget morass in Sacramento, where the Legislature is currently trying to bridge a projected $24-billion budget deficit.
“We all know when the state braces for brutal cuts, we’ll have to run and hide for cover,” Glendale City Manager Jim Starbird said at a May budget study session.
In Glendale, the City Council is scheduled to meet Tuesday morning for a budget study session to finalize a spending plan proposal before a public hearing that night.