New City Budget Cuts Protect Mandated Reserve, But Not Balance

In response to continued shortfalls in projected sales tax and property tax revenues, the City Council reduced city expenditures for fiscal year 2010-11 Tuesday by two-thirds of $1 million -- enough to protect its mandated 20 percent reserve, but not enough to balance the operating budget.

"I want to see if there's some way we can find $190,000," Vice Mayor Alan Schwartzman said in reference to the additional cuts needed for a balanced budget, conceding, "We're not going to do that tonight."

Although the new cuts are not expected to effect services or staffing levels, city staff had said it would need more time to produce an up-to-date balanced budget. Schwartzman was successful Tuesday in setting a May 17 deadline for those cuts.

"The economy is very volatile," City Manager Brad Kilger said in explaining the timing of Tuesday's adjustments, which were approved unanimously. "We feel that the situation is probably not going to get better, so it's better to take this action now."

The city has separate policies requiring that annual operating budgets be balanced and have a General Fund reserve of 20 percent of the budgeted expenditures. It previously reduced its 2010-11 budget in December, and the council then requested timely adjustments if revenues continued to slump.

By further cutting expenditures Tuesday, the amount needed to retain a 20 percent reserve likewise declined by $84,315, an approach that bothered Councilmen Tom Campbell and Mike Ioakimedes.

"When it (expenditures) goes down, it can kind of mask a weakness in the budget," said Campbell. "It's not really a solid 20 percent."

"The real goal is to end up with 20 percent of our operating expenditures at the end of the year," said Finance Director Rob Sousa. "In a better economy, I think we would say this is a budget 'wrap' until the end of the (fiscal) year."

"The real weakness of the budget is that it's not balanced," said Mayor Elizabeth Patterson, whose attempt to satisfy Campbell's complaints was met with sharp retort.

"Accounting is not a ficticious novel," snapped Campbell toward the close of the discussion.

The cuts approved Tuesday included $346,840 in operating expenses for city departments and $195,000 in budgeted infrastructure projects, about half of which was for removal of the West Channel Road Railroad Bridge.

The adjusted $31 million city budget now has a reserve of $6.2 million, although $2 million of that is actually scheduled for payment to the city in June 2011 and 2012 as part of the Valero Good Neighbor settlement.