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City Sees Finances Collapse
By Harry Saltzgaver
Executive Editor
It took less than a month for Long Beach’s financial gurus to decide that the city’s general fund was going to finish fiscal 2009 in the red if something wasn’t done.
Financial Management Director Lori Ann Farrell first sounded the alarm with a memo on Oct. 23, just more than three weeks after the 2009 budget went into effect. Farrell said then that the collapse of oil prices and the rapidly deepening recession would cause a $14 million gap between revenues and expected spending.
Since that time, the gap has grown to $15.7 million. Add the fact that the state likely will look to local governments as a way to balance its own budget crisis, and it became clear immediate action was needed, according to City Manager Pat West.
“We’ve already given targets (for spending reductions) to department heads,” West said. “We’re looking for one to three percent now. We’re instituted a hard hiring freeze, and restricted purchasing to $25,000 without city manager approval. We’ll meet with all the department heads Friday to see if we can figure what we can come up with for 2009.”
West said Long Beach is better off than many other California cities because the Long Beach fiscal year doesn’t begin until Oct. 1. Most cities follow the state’s fiscal calendar, running from July 1 to June 30.
“Most everyone else only has six months to go,” West said. “At least we caught this is the first quarter.”
A key to the sudden looming deficit is the drop in oil prices. When the city’s budget was prepared, oil was selling for as much as $140 a barrel. The city gets a significant portion of the profit from all oil pumped out on land in Long Beach. A smaller share of offshore oil profits goes directly into the city’s Tidelands Fund.
On Oct. 23, Farrell predicted a $5 million shortfall in the general fund specifically from oil revenue if the price did not go back above $85 a barrel. At that time, the price was around $60 a barrel. It closed on Tuesday at about $45 a barrel.
As a partial solution, Farrell recommended a budget stabilization fund where all unbudgeted one-time revenues could be collected and used to close the budget gap. That includes an expected $6 million payment on the Sempra Energy settlement — money that Mayor Bob Foster had hoped to save to offset any money taken by the state government.
Other cost saving recommendations in the Oct. 23 memo include stopping all non-essential one-time expenses even if they were budgeted (saving $8 million), accelerating efficiency measures once aimed for fiscal 2010, including more contracting out, consolidating technology and plan check services, neutralizing a $3 million debt at the Long Beach Museum of Art (apparently through refinancing) and eliminating non-Charter commissions.
Another recommendation, in both the Oct. 23 and Dec. 9 memos is to explore a mandatory unpaid five-day furlough for all non-public safety and non-critical employees. While no definition of critical employees is offered, the savings could be $700,000 to $900,000.
However, union agreement would be required to implement that plan. West said the city currently is negotiating with unions representing engineers, lifeguards, managers and confidential employees, and will broach the subject to them before talking with the union representing most of the city’s miscellaneous employees.
The council’s Budget Oversight Committee will get an update on the financial situation at its meeting Monday, Dec. 22. West said he also will begin monthly budget updates in January with the entire City Council as part of the regular council meetings.
Third District Councilman Gary DeLong is chair of the BOC. He said he approved of the actions already being taken, and will ask elected officials to consider making the same 1% to 3% cuts other city departments are being asked to make. But he said any cuts should not impact public safety,
“I think you need to keep cuts away from the sworn officers on the street,” DeLong said. “That’s a public safety issue, and we don’t want that.”
Financial Management Director Lori Ann Farrell first sounded the alarm with a memo on Oct. 23, just more than three weeks after the 2009 budget went into effect. Farrell said then that the collapse of oil prices and the rapidly deepening recession would cause a $14 million gap between revenues and expected spending.
Since that time, the gap has grown to $15.7 million. Add the fact that the state likely will look to local governments as a way to balance its own budget crisis, and it became clear immediate action was needed, according to City Manager Pat West.
“We’ve already given targets (for spending reductions) to department heads,” West said. “We’re looking for one to three percent now. We’re instituted a hard hiring freeze, and restricted purchasing to $25,000 without city manager approval. We’ll meet with all the department heads Friday to see if we can figure what we can come up with for 2009.”
West said Long Beach is better off than many other California cities because the Long Beach fiscal year doesn’t begin until Oct. 1. Most cities follow the state’s fiscal calendar, running from July 1 to June 30.
“Most everyone else only has six months to go,” West said. “At least we caught this is the first quarter.”
A key to the sudden looming deficit is the drop in oil prices. When the city’s budget was prepared, oil was selling for as much as $140 a barrel. The city gets a significant portion of the profit from all oil pumped out on land in Long Beach. A smaller share of offshore oil profits goes directly into the city’s Tidelands Fund.
On Oct. 23, Farrell predicted a $5 million shortfall in the general fund specifically from oil revenue if the price did not go back above $85 a barrel. At that time, the price was around $60 a barrel. It closed on Tuesday at about $45 a barrel.
As a partial solution, Farrell recommended a budget stabilization fund where all unbudgeted one-time revenues could be collected and used to close the budget gap. That includes an expected $6 million payment on the Sempra Energy settlement — money that Mayor Bob Foster had hoped to save to offset any money taken by the state government.
Other cost saving recommendations in the Oct. 23 memo include stopping all non-essential one-time expenses even if they were budgeted (saving $8 million), accelerating efficiency measures once aimed for fiscal 2010, including more contracting out, consolidating technology and plan check services, neutralizing a $3 million debt at the Long Beach Museum of Art (apparently through refinancing) and eliminating non-Charter commissions.
Another recommendation, in both the Oct. 23 and Dec. 9 memos is to explore a mandatory unpaid five-day furlough for all non-public safety and non-critical employees. While no definition of critical employees is offered, the savings could be $700,000 to $900,000.
However, union agreement would be required to implement that plan. West said the city currently is negotiating with unions representing engineers, lifeguards, managers and confidential employees, and will broach the subject to them before talking with the union representing most of the city’s miscellaneous employees.
The council’s Budget Oversight Committee will get an update on the financial situation at its meeting Monday, Dec. 22. West said he also will begin monthly budget updates in January with the entire City Council as part of the regular council meetings.
Third District Councilman Gary DeLong is chair of the BOC. He said he approved of the actions already being taken, and will ask elected officials to consider making the same 1% to 3% cuts other city departments are being asked to make. But he said any cuts should not impact public safety,
“I think you need to keep cuts away from the sworn officers on the street,” DeLong said. “That’s a public safety issue, and we don’t want that.”
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frustrated Long Beach resident wrote on Dec 22, 2008 9:34 PM: