Ojai Valley News Blog

City manager expects trend to continue into upcoming fiscal year

By Sondra Murphy
Predicting government revenues is tricky in any climate, but the city of Ojai has tried to be conservative in the past few years. While city finances have looked better, the good news is that staff outlined ways in which to create a balanced budget in the upcoming fiscal year.

Not surprisingly, cutbacks figure prominently.

City manager Jere Kersnar presented the midyear budget report to the City Council Tuesday with two recommendations. The first sought authorization to budget adjustments for fiscal year 2009-2010; the second was for direction to staff in preparing the proposed fiscal year 2010-2011 budget based on projections contained in the midyear report.

He said he expected a shortfall in the current budget of 11 percent, or about $907,000. “Both the midyear budget report is sort of a preview of what the budget for 2010-2011 may look like, what’s on the horizon,” said Kersnar. “Early reports were looking grim and reports since are not looking better.”

Kersnar said the biggest factors to declining city revenues centered around sales and transient occupancy taxes. A drop in midweek business travel to Ojai combined with a decline in development activity has impacted city accounts. “As you know, we’ve already adjusted our staffing in response to that,” said Kersnar, referring to the limited planning division staffing. “One of the surprising things is our property tax has remained steady. I believe it to be because we have had relatively few turnovers.” He added that, while the market values of homes have fluctuated in recent years, the assessed values have remained steady, helping to maintain that source of city revenue.

Noting a more than 20-percent decline in revenues in the past two years, Kersnar estimated that the city budget is likely to be about  $7 million in 2010-2011. “Just to remind you, we adopted a $7.9 million budget for 2009-2010, down from $8.8 million, which we thought was a conservative number,” Kersnar said. “We are beginning to see glimmers of increases. Property tax is showing a 6-percent increase, our receipts have gone up and that’s a good figure … Sales tax, however, is negative 20 percent and TOT is even worse, down 27 percent.” He said that amounted to about $900,000 less than June projections.

But Kersnar said more cuts were needed in order to stay within actual revenues and to counter unplanned unbudgeted expenditures totaling $112,000. These are comprised of Stop the Trucks Coalition assistance at $18,000; Ventura County Homeless & Housing Coalition grant at $1,500; Student Resource Officer contribution at $75,000; and National Pollutant Discharge Elimination System cost overruns at $17,035.

Besides expenditure reductions currently in place, Kersnar’s proposed new cutbacks included a $4,000 cut to the Historic Preservation Commission; $4,000 savings through staff compensation time in lieu of overtime; $37,861 saved in the planner position; and $42,401 in contracted landscaped projects. “What we’re suggesting is we suspend all our contracts with maintenance and do those duties in house,” Kersnar said, adding that to continue outside maintenance contracts while eliminating staff would create problems with having enough staff to respond to issues such as pot holes or fallen tree limbs. “We don’t know what the impact will be on city services, but … that one will have the most notable impact.” The total savings for these cuts were estimated at $89,649.

“We had a surplus going into 2009. We now see a deficit of about $365,000,” said Kersnar. “That would come from reserves.” He said this would take the general fund balance reserve to about $3 million and should be a one-time, emergency use to allow them not to have to use reserves during the next fiscal year while maintaining a balanced budget.

Projections being an intangible element, much of the discussion about upcoming budget got as philosophical as accounting can. The council unanimously approved the proposed adjustments to the current budget, but were not so quick to direct staff to create the next budget based on the projections garnered from the exercise.

Kersnar projected more than an $824,000 reduction in 2010-2011 revenues, but presented possible expenditure reduction adjustments totaling $838,022. These adjustments included many of the reductions used to address this fiscal year’s shortfall, like planner position and landscape maintenance contract, as well as employee compensation strategies.

“I don’t feel there’s enough information for me to feel comfortable with the second recommendation,” said Councilwoman Betsy Clapp.

“It sounds like we’ve given a philosophy, but we’re going to wait and get more details on how we’re going to proceed.”

“All I was doing is putting it out to you: Are you satisfied with just a balanced budget?” Kersnar said. While he felt confident that staff could create a balanced budget without dipping into reserves again, he felt it unlikely that the city would be able to add to reserves, either.

Councilwoman Sue Horgan said she was comfortable for staff to proceed with that plan, expecting they would see all the details when it was presented to them. She brought up an issue discussed earlier in the agenda, that of changes in how cities must account for post-employment benefits.

With the implementation of the Government Accounting Standard Board Statement 45, post-retirement health benefits, the city faces a decision of whether to pay-as-you-go or pre-fund such benefits or explore other options. While pre-funding has many advantages, committing to the annual contributions would need to be addressed in the 2010-2011 budget. “Something we haven’t considered here is the previous discussion item, the GASB impacts, and that’s going to come into the discussion,” said Horgan.

The council and city staff voiced reluctance in cutting employee compensation in any way, but Kersnar said they would be looking into the possibility to include with the next budget report.

Mayor Pro-Tem Carol Smith moved to direct staff to prepare the proposed budget for fiscal year 2010-2011, “based on what our income will be and that it be balanced.” With this modification to the motion, it passed unanimously, as well.