Budget deficit puts city in 'survival mode'

<p>Even after keeping expenses under budget for the first half of the fiscal year, Petaluma City Hall is still grappling with a $1.6 million deficit for which there is no quick fix, officials said.</p><!-- Nothing to do. The paragraph has already been output --><p>“This is just a survival mode for us for the next couple of years,” Mayor Pamela Torliatt said at Monday’s City Council budget workshop, where officials learned a sharp decline in tax revenues has exacerbated the belt-tightening situation Petaluma faced last fall.</p><p>Revenues in the city’s $37 million General Fund are at 41 percent instead of the expected 50 percent as of Dec. 31, the midpoint of the fiscal year — about $4 million less than what came in during the same period a year ago.</p><p>In the past two years, “The most significant difference is the rapid decline in revenues of $8.5 million,” said Tamera Haas, the city’s administrative services director.</p><p>The city has received 39 percent of its expected sales tax and 46 percent of its property taxes at mid-year, Haas told the City Council. Other revenues are also lagging behind their targets.</p><p>As a result, the city could be looking at more employee cuts, either in numbers or hours worked, City Manager John Brown said. About 25 employees were laid off last fall and others accepted early retirement buyouts as a budget-cutting measure.</p><p>“The real need here, if we aren’t going to raise revenues, is to reduce personnel costs — because that’s where the money is,” Brown said.</p><p>He told the council he will be talking with employee unions about forgoing raises and scaling back hours at City Hall, which went to a four-day work week in November.</p><p>“The approach there is to give something back — the hours they don’t have to work in exchange for the pay cut they would take,” Brown said.</p><p>Council members said they feared more layoffs or salary cuts could hurt worker morale, but indicated there aren’t many choices for reducing costs.</p><p>“There’s no way to reach where you have to get, when 80 percent of your budget is salaries and benefits, without the cooperation of the workers at City Hall,” Council-member David Glass said. “There’s no way to sugarcoat that. It’s just going to be ugly.”</p><p>Brown said he hasn’t made a final decision on how to close the $1.6 million midyear gap, but pledged to meet with managers and employee groups to find ways to consolidate efforts without jeopardizing services.</p><p>“My primary goal here — beyond balancing this budget — is to keep the service reductions to as small an amount as possible,” he told the council.</p><p>Councilmember Mike Healy suggested Brown seek out ideas from all levels of the city’s 300-member workforce.</p><p>“I think we should be looking for ideas throughout the organization,” he said.</p><p>Brown also said the city will have to look at improving its revenues, by examining whether fees and charges are too low for the services provided.</p><p>“It can’t continually be the expense side that takes the hit,” he said.</p><p>Some council members said a sales tax increase for public safety operations — an idea often discussed during budget planning — should be a serious consideration. Healy said a quarter-cent sales tax hike could generate an additional $2 million a year.</p><p>Torliatt also suggested studying whether the hotel bed tax, charged for hotel room rentals, should be increased.</p><p>Both steps would require voter approval, likely at an election in 2010, meaning any additional revenue from tax increase would not be available to offset the immediate deficit.</p><p>Even so, “I think most would agree this is going to be a multi-year problem that we’re facing,” Brown said.</p><p>(Contact Corey Young at corey.young@arguscourier.com)</p>