With revenues coming in below budget and the end of this fiscal year less than three months away, the Los Alamitos City Council last night rejected the city staff’s revenue forecast, but approved spending reductions. In rejecting the forecast, council avoided the politically unpleasant task of authorizing use of reserves to cover what the staff believes will be an even larger revenue shortfall.

Essentially, the City Council approved spending cuts equal to their revision of the shortfalls included in staff’s revenue forecast. This results in a breakeven budget for the current fiscal year, which ends on June 30. That is, if the staff’s revenue forecast is low.

In proposing a motion to approve the spending cuts, but not the revenue forecast, Councilmember Troy Edgar said “I don’t agree with staff recommendation on this…I don’t think that the values of the numbers have been consistently something that we can depend on.”

If staff is right and council is wrong, it means Los Alamitos will dip into its unrestricted reserves for about $164,000 to balance this fiscal year’s spending. Although it might be contrary to a policy of balancing the budget each year, using reserves for $164,000 should not cause a problem in the short term because the city has more than $3.3 million in unrestricted reserves. Further, those unrestricted reserves do not include $2.3 million for emergencies and $0.5 million for unidentified claims against the city.

At yesterday’s special city council meeting, Assistant City Manager Nita McKay presented a revised forecast for the current fiscal year. In this budget update, revenues are expected to be lower than the original budget by $538,240. The budget adjustments call for reducing expenditures by $378,650, and using a large portion of the $215,490 surplus generated last year to make ends meet in the current year.

According to the city report, the biggest revenue shortfall is in sales taxes which are now expected to finish this year $315,800 below budget. Utility taxes are also expected to be below budget. City officials attributed revenue shortfalls to the general recession, but these forecasts are what the council rejected. This year’s sales tax budget was lower than the actual collected last year and now current sales tax receipts are expected by city staff to be more than 15% below last year.

While the city expects to make up some of the spending savings through reductions in part time labor, no layoffs are included in the budget adjustments. But, some savings come from vacant positions, including one police officer job which now will not be filled until next fiscal year. Other budget savings come from lower spending on supplies, training, overtime, and travel costs. Additional savings are realized because the city needs to contribute less to the funds for the Joint Forces Training Base pool upkeep.

In a glimpse at next year’s budget, McKay reported “Although the City’s property tax receipts will remain flat this fiscal year, it is anticipated that revenues will decline in the next fiscal year as properties are reassessed within the City.” At the meeting, she indicated that for the current year, assessed values are actually up slightly when compared to last year.