One hour before the Imperial Beach City Council sat down to pass a budget plan for the next two years, Sacramento lawmakers approved a state budget but offered little specific information.
Soon after, Governor Jerry Brown vetoed a budget plan passed by state Democrats, sending the legislature back to the drawing board and leaving budgets for Imperial Beach and California uncertain.
Should threats by state government to get rid of redevelopment agencies come to fruition in a final budget for the coming fiscal year, the city of Imperial Beach may have a $300,000 hole in its operating budget for years to come, said Finance department DIrector Michael McGrane.
"Characterizing this budget, it is status quo," McGrane said. "The same budget we have had over the past four years will continue for the next two years. There is nothing new or different in this budget."
McGrane said revenues and expenses for the next two years are based on fiscal history, but not as conservative as in the past.
"That is a big hit to our city," he said about RDA funds. "It curtails making capital improvements and attractions to our city. It causes a $300,000 operational gap that we have to address."
McGrane said the problem in addressing RDA elimination is that until a final deal is reached, it's hard to tell exactly how much it will impact city funds.
The proposed operating budget for the 2011-2012 fiscal year is $33.2 million.
The proposed budget for the 2012-13 fiscal year is $33.6 million.
Of those totals, general operating costs represents $16.96 million in 2011-2012 and $17.12 million in 2012-2013. City council passed the budget with four ayes and Councilman Ed Spriggs abstaining.
There is currently $7.4 million in city reserve or contingency funds.
Budgets for the city and state for the 2011-2012 fiscal year begin July 1.
City staff and Councilmembers expect the amendable budget to be back before Council soon, possibly by its next meeting July 6.
Mayor Jim Janney said the city's total budget will be $1.5 million in the hole for the next two years and have no money for capital improvements without RDA funds.
Council has to figure out what is best in services for the community and to look towards harder solutions now, he said.
"At what time are we going to break down and say we can't afford as many Sheriffs as we have had in the past," Janney asked. "When do we do something similar to Lemon Grove and say we have to outsource our Recreation Department?"
At more than $5 million annually, aside from paying city personnel, the city's contract with the Sheriff's Department is the single largest expense on the budget. Increases in Sheriff costs may rise more than $450,000 above current rates by the 2015-2016 fiscal year.
Janney said though consequences of the loss of RDAs in unknown, the city has to start planning now with the idea that it is going to get tough, with or without RDAs.
"It's just going to get worse, the $300,000, right off the bat is from redevelopment. I believe there is a lot more in there. We do not know how earlier agreements with the RDA is going to hold up, what the consequences of those are," he said.
He asked City Manager Gary Brown to come back with ways to broaden Council's scope. He said the city's reserve funds are rarely used and for good reason. "Even though it looks large, it won't last long," he said.
Councilman Brian Bilbray said the city relies too much on outside money. That dependency is like playing "Russian Roulette," he said, and it is finally catching up. Council had to look at how the city got in this position in the first place, he said.
"There was more importance on their pet projects instead of really thinking about what my generation is going to have to sit up here and do," to figure out how to keep the city afloat, the 26-year-old Bilbray said.
"I don't see where we can cut a whole lot. It's a shame. Hopefully, we can deal with it in the future, but it's not looking too good."
McGrane said making choices with so many unknowns now would be ugly.
"I would recommend that you adopt the budget," he said. "You have a budget in play. Should this happen, you have plenty of reserves. I have trouble taking real decisive actions that would hurt when the government does not yet know what will happen."
Included in the plan is authorization to pay the Public Employment Retirement System (PERS) side fund balance that will reduce interest costs and could save up to $110,000. McGrane said the budget is balanced with the PERS side fund payment and more realistic, but there is a trade off with the PERS payment. There are savings over time, but it reduces city reserves.
"In the budget resolution, if you adopt it tonight, is language that we control the budget at each department level," McGrane said. "There are 27 general fund programs. We will be back if in fact redevelopment goes away."
"I believe what happens with the RDA is the gorilla in the room for our budget," said Councilman Ed Spriggs.
Spriggs suggested Council look at contingencies in a different way, and the trade-off from PERS should be reevaluated.
"$110,000 savings versus a significant chunk of our contingencies going into a fairly uncertain time period. We have to look at ways that don't require the consumption of our contingency funds that we may very well need in the near future," Spriggs said.
The long-term impact threatens the city's financial infrastructure, said McGrane.
In contrast to PERS savings, he said, state level COPS grant and jail-booking fees are in question. Imperial Beach receives $100,000 a year for public safety from these funds. He said the state has been paying this fee for the past few years and if lost, the city will have to start paying somewhere between $30,000 to $80,000 a year.
McGrane said he reviews the city general fund twice a week, after every payroll and in the budget cycle, and staff will come before council frequently, he said.
"Department heads are extremely aware of the budget, and responsible," McGrane said. "There is more money saved here by department heads than I have seen working with other cities."
Councilwoman Lorie Bragg said that as a former coordinator of the Imperial Beach Senior Center and employee of the City of Imperial Beach, she had to go through the budget monthly, line by line.
"So the controls are there," Bragg said. "They have done a superior job with what little money they have to deal with."
City Manager Gary Brown said this budget does not anticipate layoffs. He said that as much as possible they are not backfilling positions.
"My department has already absorbed the position of assistant city clerk," said Brown. "That has not been filled and we are trying to make do with what we have. The assistant city manager position is at half its level with part-time."
"I think we have to figure out where our value is and go back to a city government that basically goes back to core services, and that is it," Janney said. "And it's going to get tough on employees and on what people expect to see when they walk out their door."
Spriggs questioned if City Council was in a position to adopt the tentative budget. It's difficult for him to comprehend approving a budget that already shows a negative balance, he said.
"If we have this $300,000 hole or larger, aren't we going to be back here in a couple of weeks looking at our budget," he said.
Janney said it was not negative today and the results of state laws are unknown. Brown said he would not be surprised to see city redevelopment agencies come together in a class action lawsuit against the state, but there are still too many unknowns.
"The way I am looking at it is we have to approve this budget, we do have money in the reserves depending on how this all plays out in Sacramento," said Councilwoman Bragg.
She said the city needed to proceed with caution, and mentioned that other cities are doing programs through volunteers when it comes to services the community wants to keep.
"I think the time is here to put the brakes on a lot of things and looking at programs such as graffiti removal," she said. "We have a ton of money in that. The community is going to have to get used to the fact that some of the services are gone,'she said.
"Graffiti is removed in 24 hours. Well maybe it's not going to be removed. Maybe you are going to have to get out there and paint it over yourself."