Early retirements could save $1.24M

Facing a $5.8-million revenue shortfall this year, the Newport Beach City Council on Tuesday approved a program offering early retirement incentives for some of its employees.

The program is one of several cost-cutting measures the city will consider in the coming months to solve its budget woes.

“It’s a solvable problem, I’m sure,” Councilman Mike Henn said. “But its going to require lots of cooperation from everyone along the way.”

The early retirement program could save the city as much as $1.24 million a year in the first year, according to preliminary estimates. The savings could be even higher if the city replaced less than half of the employees who would retire early, said City Manager Dave Kiff.

Those positions would likely be eliminated all together, Kiff said.

“This is something that will produce first-year budget savings and ongoing budget savings as well,” Councilman Keith Curry said.

Kiff hopes as many as 60 city employees take the deal, and hopes to fill about 20% of their positions, he said.

The early retirement program will not be offered to city safety personnel like firefighters and sworn police officers. Kiff also said he would move forward with the plan only if it resulted in significant savings.

Newport Beach experienced an 18% decline in sales tax revenues in the last fiscal year, according to a city report. The downward trend has continued into the current fiscal year — with sales tax revenues slumping an additional 8.4% over the previous year.

Hotel occupancy taxes are down 23% for the year, according to the report. Property tax revenues have remained stagnant.

The budget shortfall doesn’t include the $6 million it has to shell out to the state this year to plug its multibillion-dollar budget deficit.

The state budget Gov. Arnold Schwarzenegger signed earlier this year included a plan to borrow $1.9 billion in property tax revenues from local governments. The state is supposed to pay back the money, plus interest, by 2013.

By The Numbers

Revenue shortfalls for the 2009-10 fiscal year:

Property tax: -$0.3 million

Sales tax: -$2.4 million

Sales tax in lieu: -$3.2 million

Hotel tax: -$1.9 million

Other revenues: -$2 million

Total budget shortfall: $5.8 million