Newport Anticipates $2.3-Million Gap in 1996-97 Budget : Finance: Sinking real estate values, siphoning of property taxes and declining sales tax revenue are blamed.

Although officials managed to insulate the city’s operating funds from huge losses in the Orange County bond pool, declining tax revenue will force the city to reduce employee salaries and benefits by $2.3 million in the 1996-97 fiscal year, City Manager Kevin Murphy said.

Murphy blamed sinking property values, state actions to siphon off property taxes and declining sales tax revenue for the city’s projected budget woes. Balancing the city’s checkbook will mean hiking some fees and cutting some jobs and salaries, he said.

The city will need to breach a $3.8-million budget gap in fiscal year 1996-97, but $1.3 million of the savings will come from postponing capital projects and another $500,000 will be raised by increasing fees for city programs--which ones have not been determined, Murphy said.

Planning for the 1995-96 fiscal year budget has already occurred, and the investment pool losses are not expected to alter those plans substantially.

Down the road, residents will see some effect on the overall appearance of the city, in cleanliness and maintenance, he said.

“We’ve done a really good job over the last two years of making reductions so that it doesn’t affect lives,” he said. “People have just become numb to the fact that these things are happening and it is having an impact.”

Although the projected cuts to the city’s budget, which will likely average $60 million to $62 million annually, are more than a year off and a full package of cuts is not ready, Murphy said he would present some recommendations to the City Council in its March 13 meeting.

City employees can expect not to see raises in the 1996-97 budget, Murphy said. About a third of the savings will be from public safety positions, with another two-thirds coming from other services.

“We’ve gone pretty hard at the non-safety departments” in recent years, Murphy said. “There’s not really much left to cut.”

The city has $16.2 million invested in the bond pool, but nearly $11 million of that is from a bond issue to fund the city’s reservoir project, and another $4.3 million was a tax revenue anticipation note. Only $1.7 million was from the city’s general fund.