By moving money leftover in other city accounts, freezing salaries and trimming costs to cover a third-year deficit, the City Council on Tuesday gave final approval to a balanced general fund budget of $44.9 million for 2011-12.
Saying the national economy is not making its usual v-shaped recovery curve, but has instead dropped and is remaining stagnant, City Manager John Pietig said the 2011-12 deficit of $704,000, reduced from earlier estimates of $718,000, will not impinge upon the city’s $4.7-million 10-percent reserve fund or its $3.9-million recession smoothing account. The deficit, he said, includes $100,000 of one-time expenses.
With increasing costs from employee pensions and healthcare as well as recurring maintenance needs and rising fuel and utilities expenses, if the economy doesn’t improve and there’s no increase in revenues, the city will need to cut $1.2 million from its 2012-13 budget and $2.1 the following year.
The budget relies on the expectation that property tax revenue will increase by 2 percent each year. Even so, the Orange County Assessor’s office predicts that property tax revenues countywide will fluctuate 1 percent up or down. Every 1 percent change in property tax revenue in Laguna equals $210,000. The specific percentage increase will be released next month. The city expected a zero-percent increase in property tax revenue last year, but received 1.8 percent, which added $350,000 to the city’s general fund. It is expected to increase by another 2 percent in fiscal year 2012-13.
It was noted that the state needs $10.8 billion to balance its budget, which could mean the loss of an annual $100,000 state grant for the city’s police department and require a subsequent budget revision early in the fiscal year.
The council also allocated $300,000 toward public pathways and a complete streets project geared to encourage walking, bicycling and skating rather than driving. The money was initially earmarked to clean a field above the Sun Valley neighborhood on Laguna Canyon Road, where non-burnable glass, ceramics and metal had been left in the 1950s-60s and buried over time, explained Pietig. The debris gave way during last December’s flood. The city’s disaster relief fund will now cover the restoration.
A Community Assistance fund of $226,000, which the city receives as lease payments from the Festival of Arts, was divided among several nonprofit organizations in the city. The city also allocated $60,000 for a lobbyist to pursue federal grant funding.