The budget picture for the city of Davis is not pretty.
The city faces a nearly $2.4 million shortfall in revenues for the current fiscal year due to lower than expected revenues from property taxes, sales taxes and other city income.
“We are not exempt from what we’re seeing nationally and at the state level,” said City Manager Bill Emlen. “Budget projections have changed significantly over the last few months. In fact, it’s amazing how quickly things have changed.“
Deputy City Manager Paul Navazio presented the figures at last week’s City Council meeting as part of an informational presentation, noting that the main reason for the downgrade was sales tax revenues. The city originally predicted a 2.5 percent growth in sales taxes, but now Navazio is estimating a decrease of 7.8 percent.
Most of the city’s sales tax revenues – 60 percent – come from the automotive and restaurant sectors. The sales tax receipts from these sectors are 14.6 percent lower than they were during the same period last year, according to a staff report.
Navazio said there were a few very small “silver linings,” such as the fact that the city is keeping its expenditures well within budget. The city will end this fiscal year about $1.9 million under budget on the expenditure side, something he attributed partially to cost-cutting measures the city has taken.
One way the city has been saving money is by instituting a selective hiring freeze. As of Feb. 1, 21 regular full time positions in the city are vacant, according to a city staff report. Along with another part time position, this is 4.7 percent of the city’s work force.
Davis also has a significant reserve. Navazio projects that the city will end the current fiscal year with $5.35 million in reserve, which is 15.2 percent of the total revenues coming into the General Fund.
City Councilmember Stephen Souza said it was important to put the city’s situation in perspective.
“I would much rather have our dreary forecast than all of the other cities around us,” Souza said. “We are the envy of them, to have a $5.3 million reserve. They’d all love to have that. We are in bad, bad shape, but we are far better than anybody around us.“
Nonetheless, the current situation will make budgeting for next year much more challenging. The forecast for the General Fund for fiscal year 2009-2010 could include a deficit as big as $3.6 million.
At this point, city finance staff will begin reviewing budget reduction proposals and impacts and create a preliminary budget-balancing framework to present to the City Council on Mar. 10. The council will probably be asked to consider early implementation of some of the budget balancing measures for next year.
JEREMY OGUL can be reached at email@example.com.