Cities losing millions

Alicia Robinson

Even more belt tightening may be in order for local officials.

Budget cuts exceeding $7.7 million could begin to hit Newport

Beach and Costa Mesa as soon as this week as a direct result of Gov.

Schwarzenegger’s repeal of the state vehicle license fee increase.

When the governor annulled the increase in November, cities and

counties were promised the state would make up any revenue losses

with money from its general fund, as it had before the license fee

increase was put into place.

But the legislature has not yet voted on a proposal to reimburse,

or “backfill”, money to local governments for funds they would have

collected from larger vehicle license fees.

For the current fiscal year Costa Mesa’s loss will be about $4.8

million from the general fund, or about 5% of the city’s $94-million

operating budget, City Manager Allan Roeder said.

Trimming the fat from city operations is an ongoing process, so

the City Council will have to deal with the state funding cut by

setting priorities for city programs and services, he said.

“”We have literally for the past 10 years implemented as a way of

doing business the very typical cost-cutting strategies,” Roeder

said, such as downsizing administrative positions and contracting out

services. “A lot of the typical adjustments you would make have kind

of become a way of life in the Costa Mesa government.”

The city does have a $14-million reserve fund, but drawing on that

would only be a short-term solution and would also affect the city

budget because the reserve generates interest that goes into the

general fund, Roeder said.

The hit to Newport Beach finances won’t be as painful. The city

could lose a bit more than $3 million for the fiscal year if no state

backfill comes through.

That represents about 3% of the $100-million operating budget, but

officials factored most of the loss into their budget projections.

“When we prepared our budget for the year, the city assumed the

worst,” Newport’s City Administrative Services Director Dennis Danner

said.

The budget assumed license fee revenues of $1.45 million -- a

third of what the city would have gotten before the license fee

rollback. Recent projections show Newport Beach netting only $1.1

million.

While the city may lose more than it planned for, it could have

been worse, Danner said.

For now the city can afford to wait to decide on making cuts or

shifting funding priorities, he said.

The funding cut will affect cities differently depending on their

other sources of revenue, but many may feel the impact in their

public safety budgets, said Michael Coleman, a fiscal advisor to the

League of California Cities. Coleman provided cities with projections

of how much they stand to lose based on state data.

“Unfortunately the reality is for most cities, police and fire

services are 60% of their general fund operations or more,” Coleman

said.

Roeder said Costa Mesa public safety officials have expressed

concerns about the revenue loss, but in the past they’ve always

supported the city’s budget trimming efforts.

“Police and fire have to be part of the solution just like all the

other departments,” he said.

State legislators have drafted a bill to provide the backfill

money to local governments, but 70th District Assemblyman John

Campbell said Democrats have kept it from reaching the floor for a

vote.

Democrats plan to hold up the bill until they see the governor’s

budget reduction proposals, which are due out in January, Campbell

said.

Newport Beach Councilman Steve Bromberg said he’s expecting state

legislators to make good on their promise to provide backfill money,

but he may be alone in his optimism.

“The way Sacramento’s been operating these days, I guess I don’t

have as much confidence as the mayor does,” Danner said.

Roeder noted that legislators haven’t yet acted on proposals to

issue bonds to fill the hole in the state budget.

“Unless there’s a measure that goes forward the state is in no

position to pay for the backfilling,” he said.

* ALICIA ROBINSON covers business, politics and the environment.

She can be reached at (949) 764-4330 or by e-mail at

[email protected].