Council uses reserves to fill budget gap; avoids layoffs for now
SOUTH LAKE TAHOE, Calif. – A more than $1.4 million mid-year shortfall in South Lake Tahoe’s 2009-2010 budget will be filled mostly with reserve funding, the City Council decided Tuesday.
The strategy is only a temporary fix and without long-term solutions additional layoffs are possible.
The city will use more than $1 million from four reserve funds, reduce expenses by $133,600 and use $300,000 of the South Tahoe Redevelopment Agency’s loan repayment to fill a $1,470,195 gap in general revenue fund in its $30.5 million 2009-2010 budget.
Much of the shortfall in general fund revenue came from the revenues most impacted by the global recession, Finance Director Christine Vuletich said Tuesday.
The city’s hotel tax revenue is down $135,770, or 8 percent, compared to budget projections, while sales tax and franchise fee revenues are down 9 percent, or $274,563, Vuletich said.
City Councilman Hal Cole readily admitted Tuesday’s maneuver was a stopgap measure and said “systemic changes” are needed to keep the city solvent in the long term.
Those changes will likely include layoffs and salary freezes, Cole said.
The city froze vacant positions and laid off six employees as part of a cost-containment plan in their 2008-2009 and 2009-2010 budgets.
Following Tuesday’s amendments to the 2009-2010 budget, the council directed staff to pursue 13 measures that could save the city money in the long-term including:
• “Streamlining” the city’s engineering services division
• Cost containment measures in the buildings and planning division
• Less costly retirement and health plans for new city employees
• Freezing cost of living adjustments in lieu of staff reductions in all departments
• Taking employee suggestions for cost-cutting measures
• Looking at changing the city’s business license tax.
Although not included in the original list of 12 cost-saving measures, looking at how the city can reduce expenditures paid to outside consulting firms was added to the list following a suggestion from Councilman Bill Crawford.
Several of the measures will need to be negotiated with the city’s seven labor groups before they can take effect.
Jere Copeland, executive director of the South Lake Tahoe Employees Association, raised concerns with several of the measures.
A separate health plan for new employees could drive the cost of the existing plan up and a new retirement plan may not see much savings in the short or long terms, Copeland said.
Getting the employees association to support the cost of living adjustment freeze could also be an uphill battle because of a feeling among members that labor groups representing the city’s firefighters and police did not bear their share of the budget burden during contentious November negotiations, Copeland said.
The City Council approved a 2.8 percent increase in most fees for city services.
The fees are associated with everything from emergency medical care to staying at Campground by the Lake.
Estimates show the increase could add about $100,000 to the city’s general fund annually.
Mayor Kathay Lovell, Councilman Hal Cole and Councilman Bruce Grego voted for the increase, while Councilmen Bill Crawford and Jerry Birdwell voted against it.
The increase will lead to a relatively small expense for consumers, but will have a significant effect on the city’s general fund, Lovell said.
Crawford cited the state of the economy and the possibility of increased fees discouraging use in city services in his opposition to the move.
In April 15 letter to the city council, City Manager David Jinkens discouraged the move, also pointing to the state of the economy.
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