Newport girding for budget crunch

June Casagrande

NEWPORT BEACH -- A $12 billion-plus state budget shortfall could add

to the budget crunch the city is already feeling from the Sept. 11

attacks and the overall economic downturn.

City staff are taking advantage of a holiday lull to get a jump start

on the next fiscal year’s budget. Though it’s too early to know dollar

amounts, officials are bracing to see last year’s $138.4 million budget

take a nose dive in revenues.

“It’s going to be a challenging year because of the economic downturn,

because of state budget crisis, because of annexation costs for Newport

Coast,” said Dennis Danner, the city’s administrative services director.

“Our sales tax is down, our transient occupancy tax is down, and we’re

very concerned about any state action that could affect us locally.”

In particular, city officials are worried that state officials could

decide to withhold moneys from vehicle license fees and jail booking fees

normally routed to cities. Last year, Newport Beach received $3.9 million

from the state from vehicle license fees and another $22,793 for jail

booking fees.

Last year’s budget also included a one-time $5-million payment from

the American Trader oil spill settlement agreement.

“Historically, the state has looked to cities in times like these,”

said Glen Everroad, revenue manager for the city. “The governor’s

statement that he intends to partner with cities in the recovery process

suggests to me that we’re going to share the pain.”

But the city has pains of its own, not the least of which come from

the impending annexation of Newport Coast. Though eventually property

taxes from the area will be a financial benefit to the city, start-up

costs for providing fire, police and other services to the area beginning

Jan. 1 will hurt for a while.

And a $25-million bonus from annexation on the city’s financial record

books isn’t the boon it appears. All that money, which is part of an

agreement with the Irvine Ranch Water District, will go back to the

residents: $18 million in the form of tax relief, the rest as

improvements to the area. The city does, however, earn interest on that

money.

City staff are in the process of estimating their expenditures for the

next fiscal year, which begins July 1. Staff will submit the proposed

budget on May 3 to the City Council for approval. The council is

scheduled to hold a budget hearing on June 11, and give final approval on

June 25. But because the state also adopts its budget around the same

time, city officials might have to vote on the document while still

uncertain about how much money the state will contribute.

* June Casagrande covers Newport Beach. She may be reached at (949)

574-4232 or by e-mail at o7 june.casagrande@latimes.comf7 .