RIGONOMICS:

In the middle of writing this week’s column about the coming Easter weekend I received an e-mail with the agenda for the April 14, Costa Mesa City Council meeting.

First item on the agenda is, “Consideration of Fiscal Year 2009-10 Budget Development Strategies.”

In layman’s terms it means, “How does the city close a $20-million budget gap?”

At this time, there is no subject I can write about that is more important to the residents of Costa Mesa than how the city is going to balance the budget.

Reading the very thorough budget analysis by Director of Finance Marc Puckett showed that despite the fact that the city departments requested $4.5 million less than in the 2008-09 budget, the city will still be $19 million over budget due to lower revenue than anticipated.

Trust me, cutting $19 million out of a $114-million budget is going to leave a mark. An imbalance of that amount cannot just be papered over.

In the past several years, budget shortfalls have been papered over by taking money out of the “fund balance,” which is a fancy name for money that was budgeted in past years and not spent.

The $19-million deficit can be closed by only two methods: raising revenue or cutting expenses.

One way or another, someone is going to feel the hit. Raising revenues hits the residents and business owners, while cutting expenses hits the employees (73% of the city budget is personnel). To close the budget gap, someone is going to feel pain.

As part of the preamble to this meeting, City Manager Allan Roeder created a steering committee with two subcommittees. Members of each committee included representatives of the four employee associations. The Financial Review committee’s purpose was to have the city employees understand the financial position the city was in. According to Puckett’s report, by March 31, all parties were in agreement with the financial facts as presented to them.

The Financial Solutions Committee’s task was to come up with “budget-balancing strategies.” The committee came up with a list of 42 recommendations that included everything from “doing nothing” and continuing to use up the city’s fund balance/reserves, to raising myriad taxes and fees.

Besides the previously discussed raising of the “hotel bed tax” the list included some new tax-raising ideas like a Utilities User Tax on all utilities bills.

If the city charged all residents and businesses 5% on all utilities bills (water, electric, gas, etc.) the city could raise $12 million per year. Fortunately for us, this would take a vote of the people.

They also looked at all sorts of fees the fire department could raise or implement for all types of inspections.

One such new fee would be an annual inspection fee for all apartments in the city. This could raise $27,000 per year. The majority of ideas from the financial solutions committee were some form of raising revenue.

Council members also came up with 30 recommendations to balance the budget.

It was interesting to note that only one recommendation was to raise revenue and that was to sell “naming rights’ for city hall. The rest were cuts in expenses. The council’s ideas included everything from across-the-board pay cuts to requiring police and fire personnel to start paying into their retirement plan. Currently the city pays 100% of the retirement plan including the employee’s portion. (Estimated savings: $4,080,000 per year.)

The report does have a recommended “10 point’ strategy to close the $19-million hole, which includes elimination of 23 full-time positions (estimated savings $6,318,134), negotiating 5% across-the-board salary reduction (estimated savings $3,623,663) and reduction in overtime (estimated savings $1 million). These might sound like good ideas, but getting these reductions isn’t necessarily as easy as it sounds.

Most of the city employees have “Memorandums of Understanding” which in essence is a contract. To change any of the pay, benefits or working conditions, the city must “meet and confer” with the employee’s bargaining units and come to an agreement.

What happens if the city cannot come to an agreement? Well, that brings me to the last item on the City Council Agenda: “Notification of Employee Associations of Pending Issuance of Layoff notices.” If the council votes to notify the employee associations of layoffs, the clock will start ticking and layoffs could happen in about 30 days.

Based on the recommendations submitted by this council, I do not see them voting for raising taxes or fees. Hopefully, the employee associations and the council can come to an agreement to reduce expenses without layoffs. It is not the best time for anyone to find a new job, especially ones with good benefits and pensions.

JIM RIGHEIMER is a Costa Mesa planning commissioner, a local developer and a GOP activist. He may be reached at jim@rigonomics.com.