Lakewood spending outpaces revenue from lagging economy

LAKEWOOD – City Hall proposes dipping into the city’s savings to cover unbalanced budgets this year and next, prompting concern from a majority of the city’s six-member Budget and Audit committee.

The inescapable effects of the sputtering economy cut deeply into the city’s sales tax revenue, which accounts for nearly 60 percent of the city’s general fund income.

“The current trend is not the best, obviously,” Larry Dorr, the city’s finance director, told City Council in their budget review study session this week.

Sales tax collections through June are down 9.7 percent as of June, even steeper than the 8.6 percent decline posted as of 60 days ago, Dorr said. As a result, he expects the city to spend $2.5 million more than it takes in this year and projects a $2.34 million deficit in 2010’s $95.2 million budget.

The revised 2009 budget anticipates just more than $97 million in spending.

City administrators propose using the reserve fund – the city’s savings account – to cover the predicted shortfalls.

The city’s reserve fund stood at $24.3 million at the end of last year. By the end of next year, the expected two-year shortfall will reduce the fund to $19.4 million, according to Dorr’s estimates.

If revenues continue to fall short of Dorr’s predictions, staff will give City Council a menu of suggested cuts, said Mike Rock, city manager. But staff cutbacks won’t be on that menu list, Rock said, calling the cost of staff and pay raises an “investment.”

Instead, the proposal would delay upcoming staff pay increases for 14 weeks and leave current job vacancies unfilled. It also would reduce the city’s $2 million self-insurance fund by half, reflecting recent savings. It also calls for one-time “stop-gap” measures to defray some costs over the next two years.

Council members Diana Allen and Adam Paul, who serve on the Budget and Audit panel, said they were “OK” with the budget proposal moving forward, but with reservations, especially about the 2010 projections.

“I personally think we need to watch our sales tax revenue numbers very, very, very, very closely,” Allen said. “Delaying any employee raises would work for now and save some money. But if it turns out that we continue to ‘collect less, collect less, collect less’, our revised 2010 budget could be substantially different. We just need to be aware of that at the beginning of the year.”

Paul said he shares that concern.

“I feel we may not be as conservative as I would like to see us be,” Paul said. “I think the concern of the Budget and Audit committee is that these are kind of one-time deals and that this isn’t really going to be enough. And that’s where the concern comes for next year. I’m sure we will all be really watching it.”

Allen also delivered messages from two of the committee’s citizen members.

“Two of them felt like this wasn’t a conservative enough budget. One felt that we should not project our revenues as highly as we have,” she said. “And a second expressed an opinion that as far as employees are concerned, that we shouldn’t budget for any raises, that people are lucky to keep their jobs in this kind of economy.”

The 2010 budget will be before council for consideration next month. The first public hearing is scheduled for Sept. 14. The second hearing and a vote on adoption of the budget will be Sept. 28.