The fiscal year started on July 1, 2007. On February 19, 2008 the Director of Finance (Treasurer) gave a report to the Chula Vista council on the status of the budget as of December 31, 2007-the end of the second quarter. Tawny Maya McCray the reporter for The Star News wrote the article pictured below. Theresa Acerro wrote the summary of the meeting surrounding Tawny's article.
The city manager did try to make it clear to the council on 2/19/08 that the city's financial situation is very "grim." (Video of the city manager's introductory comments.)
The Director of Finance gave a short presentation giving the details. (Video of Treasurer's Report) She first reviewed how the first quarter deficit was dealt with. The salary deferral is an agreement the city made with employee unions to defer payment of raises until latter in the year when the employees will get their raises as a lump sum. How the city plans to come up with the money to pay this has not been explained. The hiring freeze is to be extended until the end of the year.
The problem is the city is still spending more than it is taking in as this table shows the deficit in Quarter 2 was 3.5 million dollars.
This chart shows the city's discretionary revenue shortfalls. As housing values continue to fall and foreclosures increase people are asking the County to reassess their properties. This is lowering the city's property tax revenue. The slower market also reduces the Real Property Transfer Tax Revenue. They did refinance some of their bonds, which gave them a one-time savings of $1,200,000 and the city projects a $500,000 savings in Workman's Compensation. This gives them a shortfall of $404,032 dollars in discretionary revenue. Unfortunately other revenues also have declined.
Imperial Beach, Coronado, Carlsbad and Chula Vista are the only municipalities in the County, which are not in the red in sales tax. Chula Vista, however, essentially has just maintained, rather than grown. This is less than was projected so it is contributing to the deficit.
A lot of the problem is the state is already impacting the city. They have not taken money away YET but they are delaying paying money such as gas tax money so that the state can benefit from the interest on this money at the expense of the cities.
A big concern is that the deficit will have to come out of the reserves, and it now is predicted that reserves will be down to 4.30% by June 2008. This is the reason an administrative freeze on all discretionary spending being recommended until June.
The City Manager commented on the reserve situation. (Video of comments by City manager and Council) They had to go down to 6.3% from the council goal of 8% in order to balance for first quarter. They now predict they will go down to 4.3%. The city manager believes that if all discretionary spending is curbed the city can end the year with 6.3% reserve. He has talked to all the departments and unions and everyone has agreed to make these cuts. He also commented on how the state is holding on to money to help their budget problems. The mayor commented that she had talked with Senator Ducheney and asked her to get the state to release the money to the cities. Councilman McCann commented that he believed the assumption on assessments should be reduced even more than what is being predicted. Councilman Rindone commented that the problem was statewide. He asked that the number of steps to be taken be shared with the public.
The city manager gave these examples of discretionary funding being cut: hiring freeze, eliminating non-essential services, training, conferences, purchase of: meals, books, computers, reviewing all purchase orders to see which can be cancelled, stopped all vehicle replacement and purchases, reduce number of cell phones by 50%, cancel all credit cards possible (and use purchase orders instead to better track expenditures), cancel all non-essential personnel and personal service contracts, eliminate employee and volunteer rewards and luncheons, closely monitor overtime, and freezing all department contingency accounts. He promised to give a more detailed manager's report latter. (Video of City Manager's list of cuts.)
This all seems really bad for the city and its residents whose level of services is sure to dwindle. How seriously does the council take this? Not very it seems, because the mayor and Councilman Rindone had ordered the City Manager the week before to spend staff time to come up with an ordinance for Third Ave. between E Street and G Street and a companion Proposition to put on the ballot with the citizen Initiative titled the General Plan Protection Initiative. The legislative Committee (Mayor Cox and Councilman Rindone) also told him to commission a financial analysis of the citizen Initiative at a cost of between $50,000 and $80,000. (Remember one of the cuts is supposed to be unnecessary personnel contracts and two financial analyses have already been done of this initiative.) Putting their proposition on the ballot would cost the city $54,000 more. It just does not seem that they get the extent of this problem or they simply don't care if the city is solvent or not or is it just more important to support their developer friends who can be counted on for generous campaign contributions funneled through the Lincoln Club?
The mayor pulled her proposition from the agenda on 2/26/08, but she made it clear it was not out of a new sense of fiscal responsibility, but only a temporary delay. Video of her comments.