Newport prepares for leaner times

Newport Beach will have about $8 million less to spend in the coming fiscal year compared with last year’s roughly $200-million budget because of slumping tax revenues, City Manager Dave Kiff said this week.

Although the economy is slowly recovering from the recession, Newport Beach will continue to cope with the aftereffects of shrinking tax revenues for some time, Kiff said Wednesday.

“The bleeding has stopped, but the patient is still recovering,” Kiff said.

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% compared with the previous year.

Hotel occupancy taxes are down 23%, according to the report.

Before the housing market went bust, Newport Beach saw property tax revenue grow at a rate of 6% to 12% a year, Kiff said. This year, the city expects property tax revenues to remain stagnant due in part to reassessments.

While it’s good news for Newport Beach residents who will pay less in property taxes, this also will put a dent in the city’s finances, Newport Beach Councilwoman Leslie Daigle said at the City Council meeting Tuesday.

“There is another side of the coin — the decrease in property tax revenues will negatively impact revenues to the city, which go to fund services that we deliver to the community,” Daigle said.

Some of the gap in next year’s budget will be closed with an early retirement program for municipal employees that is projected to save the city about $3 million a year, Kiff said.

The city started the year with about 840 employees, but that number could be reduced to about 740 this year through early retirements and shifting employees around to fill some empty slots, while not back-filling other positions, Kiff said.

Kiff also said he would look at eliminating or reducing some city programs to save Newport more money, but he declined to elaborate on which city programs he was looking at cutting.

“I see an opportunity in this challenge to make some changes to this organization that will leave it a more efficient, competitive group of programs and people that fits more in line with the new normal, but it includes some pretty tough choices,” Kiff said.