Facing a $1.3 million budget deficit for the next fiscal year, city manager Chet Simmons told the Council last Monday that “austerity measures” necessary to balance the current budget will present a challenge to the city.
Simmons said while he does have a plan to achieve a balanced budget, it will be like running a car with a warning light. “You do it for too long and it falls apart.”
The city manager’s comments followed interim finance director Craig Koehler’s presentation predicting a cash shortfall of $1.3 million for the 2021 budget.
Koehler emphasized that the proposed budget is admittedly conservative, having based it around a financial consulting firm’s “worst case” scenario.
Koehler said the city’s largest revenue drop is due to regulatory changes and an estimated decrease in sales and use taxes of approximately $800,000. There will be other small decreases, including an odd decrease of $46,000 in fewer property taxes.
The biggest increase will be in police services, said Koehler, the cost of which will increase by $619,000.
With expected revenue of $13.6 million and projected costs of $14.9 million, he said, the city’s projected shortfall is $1.3 million.
Shortfall aside, both Koehler and Simmons repeatedly pointed out that because of COVID, the city’s financial position is extremely “fluid.”
As Los Al businesses get back online, the sales and use taxes could increase city revenue, said Koehler, reminding the council that the budget was built around worst-case assumptions.
Simmons told the council he will find a way to deliver a balanced budget by July, but because of the coronavirus situation, it will likely have to be revised many times. “We’re going to need a certain amount of flexibility to embrace the new normal,” he said. “There will be mid-course corrections.”
Simmons said he has worked on the plan with Mayor Pro-tem Mark Chirco and council member Shelley Hasselbrink, the members of the Budget Standing Committee. Simmons, relatively new to the city, credited both council members for a “significant amount of work” that already been done.
In numerous sessions, the committee has explored every avenue to cut costs and find savings, said Simmons. Their work is “far reaching,” and that “no one will go unscathed,” he added.
The city manager said he had delved deep into the “meat and potatoes” of the city’s organizational structure to understand how to make cuts without sacrificing the overall mission of delivering services.
Simmons nevertheless said he expected the “lean” look to be short term, adding that it is still entirely plausible that the city could close the financial gap at some point with federal and/or state relief funds.
Until then, however, Simmons outlined his proposal for departmental consolidations, potential contracting, hourly reductions, holding positions open and other savings required to deliver a balanced budget.
Simmons also told the council that not all the planned changes were possible “with just the stroke of a pen.” Some may take voter approval, he said, and some will require the nod of government employee unions.
“It’s not a small hole,” said Simmons, “it’s going to take hard work and tough choices.”