City balances budget, but long-term deficits loom
SOUTH LAKE TAHOE, Calif. – The South Lake Tahoe City Council patched an anticipated $2.8 million hole in the city’s 2010-11 fiscal year general fund budget last week.
But how the city will combat a projected structural budget gap of more than $12 million during the next five years without a significant turnaround in the local economy remains unknown.
The city council balanced the budget on Aug. 3 by eliminating $470,00 in operating line item expenses such as supplies, equipment, training and contracted services, as well as receiving $1.32 million in labor cost savings from agreements with labor organizations reached in July.
The savings in labor costs were achieved by offsetting scheduled cost of living increases, reducing costs for animal control services, freezing two vacant police officer positions, freezing one fire division chief position via early retirement or layoff and changing the fire department to a 48 hours on, 96 hours off schedule.
The city also used $850,000 in one time revenue and expense reductions from other funds to fill the general fund gap. The city council has used one time funding to balance the city budget since 2008. One time fixes won’t be available beyond the next few years, said Finance Director Christine Vuletich at the meeting where the council approved the budget.
City Councilman Hal Cole said he was proud of how the city has handled its budget in recent years, avoiding layoffs and cut backs on par with El Dorado County or other cities around the state.
Projections that the city will face a $12.7 million structural budget gap during the next five years are “troubling but not catastrophic,” Cole added.
But, without a turnaround in the local and national economy, it’s unknown how the city will fix the projected gaps.
Vuletich described the structural deficit as a “tough situation” for the city, especially given the slow nature of the national economic recovery.
Despite creating a lower cost retirement benefit tiers, the city’s fixed costs for active employees and retirees continues to rise. The city expects to spend $2 to $3 million more than it takes in during each of the next five years.
And options for additional revenue generation are limited.
“On the revenue side we don’t have anything on the horizon that would give us new revenue of significance that would improve this picture at this time,” Vuletich said.
Former City Manager David Jinkens made several recommendations to help improve the South Shore economy on Friday, including using Redevelopment Project Area No. 2 money to develop a green business park on vacant land at the Lake Tahoe Airport and attracting major retailers to South Lake Tahoe.
He said continued participation in a regional prosperity plan and preventing further state takeaways from local governments will also be keys to maintaining the city’s financial health.
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