AgdaPkt 2009-09-14 - Laserfiche WebLink

Browse Search

REPORT 8A age 1 September 14, 2009 SUBJECT Fiscal Year 2009/10 Budget Update and Study Session RECOMMENDATION Receive update on current status of City's General Fund budget, consider options presented, and provide direction to prepare requisite information for City Council decision-making meeting on October 19, 2009. BACKGROUND The City Council held two budget study sessions in June 2009 and then approved a package of Fiscal Year 2009/10 budget amendments on July 13, 2009. The amended general fund budget addressed a projected deficit of about $8.4 million as follows: . $1.3 million reduced spending as a result of across-the-board salary freezes . $4.2 million in expenditure reductions for programs and services across all departments . $2.9 million allocated from reserves (to cover 330/0 of the projected deficit) These painful cuts required a reduction in workforce of 25 full-time equivalent positions (14 vacant and 11 filled positions). Even with access to the Council's Exit Incentive Program, five people had to be laid off from their jobs. Since July 2008 $5.8 million of reserves has been used to fill the Fiscal Year 2008/09 deficit, which leads to an increasing concern that City reserves are projected to drop from $23.9 million as of July 1, 2008 to $15.2 million by June 2010, absent any further revenue changes. STATE ACTIONS SINCE JULY Subsequent to the Council's decisions in July, the State enacted Proposition 1A "borrowing", which will divert $2.9 million of property tax revenues from Redwood City by the end of Fiscal Year 2009/10. This revenue shift represents a loss equal to about 3.501<> of general fund expenditures. Overall, the State is lIborrowing" over $1.9 billion from cities and counties under voter-approved Proposition 1A, which was passed in 2004 as a way to prevent the State from its continuing practice of diverting local government revenues with no intention of repayment. Under that law, the funds must be repaid within three years, with interest, and no further borrowing can be made until it is repaid. The Governor and legislature stopped short of diverting State gas tax revenues away from cities and counties, however that threat is still under intermittent consideration as the state confronts its on..going deficit. Should the proposal to divert gas tax revenues be revisited and implemented, Redwood City could lose at least $1.2 million in annual revenues that go into the general fund and which support street maintenance programs and services.