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El Centro could face $1.7 million budget shortfall in 2004-05

June 12, 2001|By RUDY YNIGUEZ, Staff Writer

The city of El Centro is facing a budget shortfall of $1.7 million in its general fund by fiscal 2004-05 unless the City Council takes action to reduce expenditures or increase revenues.

That was the bad news delivered to the council by City Manager Abdel Salem at a public budget workshop Monday.

"The goal of the workshop is to share the financial information the city faces and to get feedback from the City Council," Salem said, adding a draft budget is developed after verification of financial numbers submitted by city department heads. "We're predicting quite a bit of hardship in years to come."

Although the city faces a potential budget deficit, things are better for the immediate future. For fiscal 2001-02 the city projects a surplus of $2.3 million, for 2002-03 a surplus of $1.3 million and for fiscal 2003-04 a deficit of $110,809.

Those are the projections if the city takes no action. There are 37 new personnel requests and capital outlay requests of $6.3 million, however.

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If the general fund budget were to include the personnel requests and only part of the capital outlay requests, the fiscal 2001-02 budget would have a surplus of $2.1 million while fiscal 2004-05 would have a deficit of $2.1 million. With personnel requests and all capital expenses included, fiscal 2001-02 would have a deficit of $363,352, while fiscal 2004-05 would have a deficit of $9.4 million.

The single, largest expenditure the city faces is in workers' compensation premiums. The city normally pays premiums worth $342,000 yearly, with another $400,000 in claims. Beginning July 1 the city faces $1.2 million in premiums, with no change in claims.

Mayor Cheryl Walker said the increase in workers' compensation stems from the Legislature, in that certain injuries are now presumed to be work-related.

"We're at the mercy of the Legislature when it comes to workers' compensation and the Legislature has made it an expensive proposition for local government," Walker said Friday. "We did not expect our workers' compensation to up as unexpectedly as it will be in 2001-02.

"It's an expense with no benefit," she said.

The city is facing a potential shortfall in sales tax revenues for fiscal 2001-02.

Walker said the shortfall follows a state economy that is slower overall.

Phil Carr, city director of administrative services, said Friday the shortfall will result in the city receiving about the same in sales tax revenues as the current year, about $6 million.

"It's about the same as last year," Carr said. "We consider that as flat."

Ideas on how the city might cut expenditures or increase revenues included self-insurance for workers' compensation, contracting for certain city services and offering certain services to other communities facing tough budget decisions.

"If we don't start looking outside of this box, we'll be locked in it forever," said City Councilman Larry Grogan.

Councilman Jack Terrazas suggested the city use "creative financing" and consider selling certain city assets.

"There's nothing wrong if we get in debt, as long as we pay it off," he said.

Meanwhile, Salem said the city's biggest sources of revenues are property taxes, sales taxes and motor vehicle taxes. He said the city only gets one-quarter of 1 percent of property tax increases, which are limited to 2 percent yearly under Proposition 13.

Salem said the sales tax is good source of revenue but it is not guaranteed.

"The sales tax has been our source of reserves but it's volatile," he said.

Walker asked that a second workshop be set and that department heads prioritize their requests.

"Let us know where you see the most-pressing needs," she said.

The council set a second workshop tentatively for June 26.

Staff Writer Rudy Yniguez can be reached at 337-3440.

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