- Elizabeth Larson
Midyear budget review finds Lakeport's expenses up, revenues down
The Lakeport City Council held an hour-long session to look at their budget situation before their regular meeting Tuesday evening.
City Finance Director Janet Tavernier led the council through the initial part of the review, showing them numbers and explaining the different fund balances.
The city's general fund balance on Jan. 31 was $758,236. Total general fund expenditures are $2,508,899, with general fund revenue at $2,312,412.
The bottom line wasn't good. “We have spent more than we brought in by $196,487,” she said.
The redevelopment agency has expenditures of $1,033,990, with $1,406,200 in revenue. With other balances worked in, redevelopment's balance as of Jan. 31 was just over $1.4 million.
Several factors are at work behind the city's current financial situation.
Tavernier said that the city's property taxes are where they were anticipated to be. Sales tax for the first part of the year is down by 5 percent, but that's where the state Board of Equalization had predicted sales tax revenues would be as a result of the economic downturn.
By fiscal year's end this coming June, sales tax is expected to show more softening, with sales tax revenues expected to be down by a total of 12 percent, Tavernier said.
She said the city has collected 60 percent of its property tax, and they expect to have collected at least 95 percent of property taxes by June 30, which is in line with what's budgeted.
“It's still a work in progress,” she said of the budget.
Franchise fees are where the city expected, and property leases appear OK, while interest earnings are down due to dropping interest rates, said Tavernier. Building permits are down, as are enforcement fines.
Some grant funding isn't coming in, said Tavernier, although the city on Tuesday received a $50,000 COPS grant – which is for law enforcement purposes – and expects to get the other half by the end of the year.
During the city's budgeting process last year, a $400,000 line of credit was included in the budget as a revenue source in order to cover a gap between spending and expenditures. That line of credit was a topic of considerable concern during the review.
Mayor Ron Bertsch asked how they would actually take out the line of credit if they needed it.
Tavernier replied that they would need to vote to amend the budget.
The line of credit, she emphasized, doesn't currently exist other than the line item in the budget. “We don't have a line of credit at any bank,” she said. Such a line of credit would have to be set up with the council's approval.
Bertsch said he wanted to see the line of credit removed from the budget. Councilman Bob Rumfelt asked why Bertsch wanted to do that. Bertsch replied that he was concerned that the money might be spent, putting the city into deeper debt. He said he wasn't sure that anyone actually wanted to borrow that money to keep the city going.
“What I would like to do is stop it before it happens,” he said.
Tavernier said she can't remove it from the budget unless the council votes to take that action.
Interim City Manager Kevin Burke noted that when City Manager Jerry Gillham – currently on medical leave with the Oregon National Guard, after a trip last year to Iraq – did the budget last year, his rationale in including the line item was to give the city an option, with the hope that it wouldn't need to be used.
“So much has happened since then that we haven't expected,” said Burke, referring to the state of the economy.
Bertsch asked if it's expected to get worse. “That is the prediction,” Burke replied.
The mayor said he wants to take the line of credit out of the budget so city staff knows not to spend it.
If the line of credit was removed, Burke said they would then need to go in and cut $400,000 out of the city's expenses. He said some savings already have been achieved through the city's furlough program for staff. Staff were put on a two-week furlough in December and early January during the holidays, when Lakeport City Hall was closed for two weeks, as Lake County News has reported.
Council member Suzanne Lyons suggested that the council look through the entire budget and see how it stands in order to decide what action to take.
“If we don't have that cushion, we better start making cuts right now,” said Councilman Roy Parmentier.
Tavernier said the city has received some money from the Channel Cats and Lakeport Unified School District that wasn't anticipated. The city also received $80,900 in insurance rebates, although she needs to adjust all department budgets for insurance and didn't know how much surplus the money would end up being.
Departments working to keep expenses down
Overall, the city's general fund expenditures are at 37.9 percent, said Tavernier.
In the City Council's budget department, 84.3 percent of funds have been spent, including more than $38,000 in legal fees, some of it relating to the Vista Point Shopping Center lawsuit against the city, in which developer Barry Johnson has sued saying the city breached an exclusive negotiating contract with him for the land. The city said that agreement had expired long before the last bids for the property were taken. The legal fees in that case account for nearly $22,000 in funds that were not budgeted.
Councilman Jim Irwin asked Tavernier to prepare a list of changes to the budget that the council eventually could take action on, including removal of the line of credit.
Burke suggested the council could use Measure I sales tax revenues and sale of city property to the redevelopment agency to cover the gap. A project on Martin Street also will be removed from both the revenue and expense sides.
City Engineer Scott Harter said the city could stand to receive a $33,000 grant from the state to reimburse the city for some of the costs to renovate the Westshore Pool if an Americans with Disabilities Act project is signed off on by a state inspector.
Irwin asked Public Works Director Doug Grider why his department's operating expenses were so low – 27.3 percent overall.
Grider said they weren't spending money on items unless they were really needed.
He added, “We're just not doing some things.”
That means deferring maintenance of some city facilities, which Grider noted “someday may catch up with us.”
Burke reported that he's working with the county on a new animal control contract in the hope that the county can take animal control services back from the city. Lakeport Police is covering animal control duties this fiscal year, which was done in an attempt to lower costs.
Irwin asked fellow council members to look at “big picture policy” regarding the general fund.
This year's budget was balanced based on the line of credit, but Irwin said he could see change will need to be made in order to balance the budget going forward, especially with revenues expected to be down again, such as property taxes, which should be down next year due to reassessments.
He said the council needed to talk about where they are going to make the cuts – and if they're willing to make those cuts in the first place.
Before he digs into the budget to look for places to cut, Irwin said the council needed to provide a clear policy direction on how it would address its budget shortfall, which he expected to grow to $500,000 – out of a $4 million budget – due to the estimated 12 percent shortfall in property taxes.
Irwin said the council needed to face up to the situation, and spending reductions were the only option he sees.
Rumfelt said he felt if they went through the budget and made some spending adjustments, coupled with plans to offer a “golden handshake” retirement plan to some employees, that they could find savings in that $500,000 range Irwin mentioned.
“Everybody is behind the eight ball,” Rumfelt said, with governments around the state talking about cutting services and raising taxes. The golden handshake option itself will mean reduced services.
The council will hold a special meeting beginning at 6 p.m. on Tuesday, Feb. 24, to continue the discussion on how to address balancing the city budget.
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