Signal Tribune Newspaper

BY NICK DIAMANTIDES
Staff Writer

The City of Signal Hill is faced with the challenge of having to do more with less, but it is far from having a budget crisis like most cities in California. That’s what the city’s administrators explained to the Signal Hill City Council and three commissions in an hour-and-a-half meeting at City Hall Tuesday evening.
“This is one of the toughest budgets that I have seen in the 12 years that I have been on the council,” said Vice Mayor Ed Wilson. He noted that the worldwide, national and state economic recessions are impacting all cities, and several California cities are considering filing for bankruptcy.
Wilson stressed, however, that in spite of the widespread economic calamity, Signal Hill is still in good fiscal shape. “But we are going to have to be diligent in looking for ways to reduce costs,” he added.
City Manager Ken Farfsing agreed with Wilson’s assessment. “This is one of the more difficult budgets that I have worked on in my 28 years of working for local governments,” he said. Farfsing explained that the mortgage meltdown, the near collapse of the banking industry, the decline of financial markets and the bankruptcies of Chrysler and General Motors have significantly weakened the financial stability of all governmental institutions.
“Part of our problem at staff level is that 70 percent of our (General Fund) revenue is sales-tax driven,” Farfsing said. He explained that the state releases sales-tax figures six months after sales are made in a particular city, which makes it difficult for city administrators preparing a budget for the next fiscal year to predict exactly how much sales-tax revenue will flow into the city’s coffers.
Farfsing noted that Signal Hill is not in a budget crisis because, during the past few years of budget surpluses, the city council had the foresight to put monies into reserve funds that could be used during years of revenue shortfalls. Farfsing warned, however, that it would probably be several years before the city enjoys budget surpluses again. “When the economic recovery comes, we expect it to be a flat recovery,” he said, explaining that no one could predict when sales-tax revenues would return to the levels experienced three or four years ago.
Farfsing said the Fiscal Year 2009-10 budget recently adopted by the council was fashioned to deal with a 10-percent structural deficit. He stressed, however, that the council and management had decided that cutting back expenditures by 10 percent this year would have resulted in too drastic a reduction in city services. He explained that instead of doing so, the city had adopted a five-pronged budget strategy, beginning with gradual reductions in expenditures during the next three years.
Other aspects of the strategy include leaving some vacant positions open, increasing fees, and drawing money from the reserve funds. “The reserve funds are only one-time monies so you have to be very prudent in how you spend those,” Farfsing warned.
The fifth prong in the city’s economic strategy is to implement a more aggressive program of economic development. Farfsing noted that, in order to do so, the Signal Hill Redevelopment Agency (RDA) recently hired a consulting firm to determine the kind of retail businesses that would have the greatest likelihood of succeeding if they came to Signal Hill.
Farfsing added that, by state law, the RDA will lose its power of eminent domain in about a year and a half. He explained that the agency is now in the process of acquiring small vacant lots and assembling them into larger parcels in order to make more land available for retail use.
According to Farfsing, the city had 102 employees in 1995, and while the current budget allows for 107 employees, the actual number is still 102. He noted that during the past 15 years the city’s population went from less than 9,000 to more than 11,000 and seven new city parks were created for a total of ten. He pointed out that while service needs have increased, the number of city employees has remained about the same.
Farfsing explained that some jobs once done by city employees are now done by private companies under contract with the city, which has resulted in significant cost savings. He added that every city department has also reduced its budget by two percent for the 2009-10 fiscal year.
Those measures are aimed at dealing with an expected $2.13-million decline in estimated revenues, which includes 18 percent ($1.7 million) less in sales-tax revenues than the city received in the 2008-09 fiscal year. A few weeks ago, the council adopted a $17.7-million General Fund budget, which required an approximately $2-million infusion from the city’s reserve funds.
After Farfsing’s presentation, department heads or upper-level managers took turns detailing the expenditures and reductions in their respective department budgets.
At the end of the meeting, Councilman Mike Noll warned that the city could face further budget reductions in the 2009-10 fiscal year if the state takes more revenues away from the cities in order to deal with its own budget crisis. “It’s really important for you to contact your state legislators and tell them to stop taking money away from the cities,” he said.
Farfsing got more specific. “It is important to contact Senator Alan Lowenthal and Assemblymember Bonnie Lowenthal,” he said. “All the takeaway proposals are coming from the Democratic Party.”
Councilman Larry Forrester added, “We need to literally bombard them with letters telling them not to take any more from the cities.”
The next meeting of the city council is scheduled for 7pm, July 7 in the council chambers of Signal Hill City Hall.