City Unveils “Cautiously Optimistic” Budget

By Blair Clarkson
Staff Writer

May 19 -- Although Santa Monica faces another year of fiscal belt tightening, the future looks brighter than expected, according to the proposed 2004/05 budget released Tuesday by the City’s Finance Department.

Citing a "cautious optimism" about projections for the proposed $376.9 million budget, City officials reported that revenues for the current fiscal year are coming in above estimates and proposed spending cuts will be "considerably milder" than anticipated a year ago, with no layoffs expected.

The proposed budget -- which must still be approved by the City Council -- represents a $5 million decrease from last year's $381.9 million revised budget. It allocates the $6 million the City has agreed to give the School District in the upcoming fiscal year.

"Santa Monica's municipal government," wrote City Manager Susan McCarthy in a letter to the City Council, "enters this two-year budget cycle having survived, we believe, the worst of the economic downturn and having reduced substantially the gap between projected General Fund revenues and expediters that loomed before us."

While the City still faces a $4 million General Fund shortfall this year, that deficit has been greatly reduced from the $16.1 million gap in 2003/04, and the $20 million gap projected for the current cycle at this time last year.

"We're working on bringing the revenue line up to the expenditure line," McCarthy told local reporters during a briefing last week. "We made a big leap at that last year, and we're trying to do that again this year."

However, efforts to make the leap to a balanced budget may be hampered by the uncertain future of the State budget, which City officials point to as their greatest concern.

"We could plan better for our future if we knew what the State was going to do," said Finance Director Steve Stark.

With the State still unsure how it will balance its budget, McCarthy anticipates Sacramento will continue "borrowing" local revenues to patch its record budget gap.

"The governor has proposed 'two years of pain' during which the state will continue its venerable tradition of sucking back local revenues to help with their problems," she said.

To cushion the blow from these State impacts, the City has set aside $4.2 million in the budget to maintain some financial flexibility. State legislature, however, can still amend the governor's budget.

"We won't know for a while" if that cushion is sufficient, said McCarthy. "We think we've made a prudent guess, but time will tell whether it was enough or not."

As part of the effort to raise revenues this year, the City's proposed fiscal plan recommends new fees on recreation and individual services, a ballot measure to boost the transient occupancy tax (TOT) and revamping tourist marketing through the visitor's bureau.

City officials hope to raise almost $1.4 million by increasing fees for services that benefit individuals rather than the community as a whole -- such as advanced life support and ambulance services -- as well as field rental space, summer camp costs and other recreational uses.

Additionally, an increase in the TOT, or bed tax, from 12 to 14 percent could generate up to $3.5 million, according to Stark. Such a measure -- which would require voter approval in November -- could help bankroll in future years the $6 million the City has agreed to give the schools.

To boost promotion of Santa Monica as a "destination," the budget provides added funds to the Convention and Visitor's Bureau (perhaps as much to $500,000, Stark said).

Yet while the City's financial picture is rosier than last year's estimates, the proposed budget will still require further cuts to community services and City operations, including the shuffling of several City employees and the elimination of certain vacant Police and civilian positions.

As they did last year, officials proposed deferring capital improvement costs by eliminating select landscape maintenance services and reducing ongoing costs to repair streets and sidewalks. Yet they hope the community will not be overtly impacted by this "erosion of services."

"The nature of the cuts we've made have by and large not been dramatic," McCarthy said. "They haven't been in your face. People aren't noticing them in the community."

Six employees will be "reorganized" or "redeployed" within several departments, including Environmental and Public Works (EPW), Community and Cultural Services (CCS) and the Library. Some may be bumped into lower job classifications or reassigned to comparable positions.

And to streamline some larger departments, seven vacant City positions will be eliminated and four vacant sworn Police positions will be "frozen" -- meaning the positions will be held on record to give the department flexibility but will not be funded.

McCarthy said that if the Council and community approve the revenue proposals and the current revenue recovery continues its upward swing, she believes the City will be able to selectively restore some of the cuts.

In addition to the $4.2 million to cushion State cuts and the $6 million reserved for the school district, the proposed budget also allocates funds for new programs and costs in the 2004/05 fiscal year. They include:

• $270,000 in costs to open the Virginia Avenue Park and Skate Park
  
• $70,000 to $100,000 in unanticipated costs for officer time and transportation to the new criminal courthouse at LAX
  
• $230,000 in ongoing operating costs and utility increases
  
• $300,000 set aside for potential increases to benefits packages of temp employees
  
• $500,000 for permit, plan check, inspection and code enforcement operations

Overall, despite the need to tighten the City's fiscal belt for a third consecutive year, officials remain optimistic that their actions, which have effectively reduced the City's operating deficit over the last two years, will continue to move Santa Monica back into the black.

"We've had to do less (cutting) this year," McCarthy said, "and by constraining expenditure growth we've been able to substitute in some new priorities and keep the gap closing."