Wednesday, Sept. 21, 2011 | The city of Santa Ana for the first time Monday publicly acknowledged a spiraling budget deficit that could be as high as $30 million by the beginning of next fiscal year if drastic steps aren't taken to bridge an annual gap between revenues and expenditures.
A report by the city's budget consultants revealed significant drops in general fund revenue, big jumps in public safety retirement costs, inefficiencies in the fire department and more than $9 million in "premium pay" given to employees.
Interim City Manager Paul Walters also issued a plan to shore up the city's finances and said he will be making his first official recommendations by January. Walters' recommendations, some of which might have to be implemented by early next year, will likely include pay cuts, outsourcing, service reductions and tax increases.
Council members were blunt in their assessment of the situation.
"We're at a crossroads of survival or total destruction, and that's the truth. That's the absolute truth," said Councilman Sal Tinajero.
The 116-page report by the consulting firm Management Partners Inc. confirmed that the city's budget crisis is largely the result of vast increases in public safety spending and outlined possible remedies that include reducing overtime pay to police officers, increasing employee pension contributions, outsourcing library and zoo services and a 1 percent sales tax increase.
Among the report's findings:
- Revenue declined over the last few fiscal years, going from $209.4 million in fiscal year 2008 to 196.4 million projected for the current fiscal year — a 10.8 percent drop.
- Premium pay — pay in addition to salary for special employee assignments — cost the city $9.2 million. The report found that at least some employees receive premium pay when there is no need. Most of the premium pay was doled out to police and firefighters.
- Retirement costs continue to climb. The city's retirement payment is scheduled to be $18.9 million for the current fiscal year and is projected to be $25.2 million — 12.2 percent of the general fund — by fiscal year 2013-14. About three-fourths of the cost is for public safety.
- Compared with other large California cities, Santa Ana's spending on nonpublic safety services -- in terms of actual consumption of the general fund -- was less than average. The city's spending on public safety is above average.
- Staffing levels in the fire department probably don't match actual needs. At least 63 firefighters are required to be on duty at all times, per an agreement with the firefighters union. In the very early morning hours, however, there was an average of less than one call in three hours. Some fire trucks and engines also responded to significantly more calls than others.
- The City Council had closed a predicted $13.6-million deficit when the current fiscal year's budget was adopted in June, mostly through one-time fund transfers. But because of state takeaways and other revenue shortfalls — including general fund payments to preserve the city's redevelopment agency and the loss of vehicle license fee revenue — the deficit is likely to grow to $20 million for this fiscal year.
Among the report's recommendations:
- Asking the voters to approve a tax hike. Suggestions include increases to sales and utility users taxes and a new 911 service fee. A 2 percent increase in the utility users tax could yield nearly $11 million in new revenue. A 1 percent increase in sales tax could yield $21 million.
- Public safety employees and other employees should pay 9 percent and 8 percent respectively of the shared retirement contribution costs. Police and firefighters now contribute less than 3 percent. The report does not specify how much the change in retirement plans would save the city.
- Premium pay should only be paid for "sound business purposes." Reducing premium pay by 25 percent could save $2.3 million.
- Leave time is treated as time worked when calculating police and fire department overtime pay, which is not required by the Fair Labor Standards Act. Reducing overtime calculations to conform to the act could save $2.5 million.
- Fire engine and truck companies should shut down when there isn't a corresponding demand. Fire stations should be eliminated or staffing reduced in areas of low demand. The report does not specify how much could be saved by such measures.
- Having the city's rescue ambulances staffed by civilian personnel rather than fire department paramedics could save the city $3.5 million to $4 million per year.
- Outsourcing many services — including firefighting, library, animal control, fleet maintenance and the Santa Ana Zoo — could produce significant savings. Depending on the service, savings could range from $50,000 to $825,000.