CITY MANAGER's budget update

September 21, 2011

The philosophy of the City Council has always been to adopt a balanced budget that provides for the efficient delivery of the highest level of service possible.  Staying true to this philosophy has enabled the City to be better positioned to adapt to the enormous economic challenges of the last few years. 

On June 21, 2011, the City Council adopted a balanced budget that continues to provide for the highest level of service possible with the revenues available.  The FY 2011/2012, $32.3 million general fund operating budget follows three years of difficult department operating budgets cuts, renegotiating of contract agreements, project and capital purchase deferrals and position vacancies.  In all the adjustments made to ensure our revenues match our expenses have added up to $5.5 million. 

Since the adoption of the budget staff has continued to work toward improving operational efficiencies and cutting costs where possible.  To cut current costs we have contracted with the City of Garden Grove to share the services of their City Clerk.  To help bring down future costs city employees recently agreed to pay additional contributions to their retirement savings and have lower pension formulas for new hires.

Unfortunately for all of us, the economy has not come roaring back yet and it’s not expected to get much better in the short term.  On top of that, the State of California is still looking to local government revenue sources to solve its fiscal problems.  In June the legislature passes ABx 26, which abolishes redevelopment agencies statewide.  A partner bill was also passed, ABx 27, which allows redevelopment agencies to continue to operate provided they pay the state “ransom” payments.  The ransom payments for the Fountain Valley Agency for Community Development equate to $3 million in the first year and $700,000 annually thereafter.  To fight this detrimental funding takeaway by the State, the California Redevelopment Association filed a lawsuit in the State Supreme Court challenging the constitutionality of ABx 26.  At this point, the court has issued a stay on the bill and will be hearing the case in early 2012. 

While the Council is proud of the balanced budget that was adopted for this fiscal year, we definitely are nowhere near out of the woods.  We continue to look for ways to improve our service, gain efficiency, and cut costs.  We are confident that we can meet the challenges ahead. 

Sincerely,

Raymond H. Kromer
City Manager