DOWNEY - Due to a sharp decline in tax revenue last year, the city anticipates a budget deficit of nearly $4.8 million this fiscal year. In addition to curbing spending, officials will utilize money from the city's general fund to mitigate the deficit.According to the 2008-09 comprehensive annual financial report, the city is in slow economic recovery after several months of material losses in sales tax, utility taxes, construction related licenses and permits and motor vehicle fees. "Sales tax is taking a hit," said John Michicoff, director of finance. "What we anticipated did happen and we saw a $3.5 million decrease in sales tax alone." The decrease is a result of an overall drop in consumer spending coupled with the loss of several major car dealerships in the city. These changes brought the city's sales tax revenue down from a budgeted $13.1 million to an actual $9.6 million. Michicoff said the loss of the car dealers resulted in a $1.5 million reduction in sales tax for the city. "That's quite a large shock to absorb," Michicoff said while presenting the annual report during Tuesday's City Council meeting. "And you can't make the citizenry go out and shop to increase sales tax revenue - the economy has not recovered as we had hoped." As revenue began to drop last year, city officials instituted a hiring freeze for non-critical positions and suspended equipment purchases as part of cost-cutting measures to reduce the size of the expected deficit. According to the report, these cost cutting measures have continued into the 2009-10 fiscal year and will save the city $3.2 million in labor, equipment and liability charges. These savings will help reduce the city's deficit, which would climb as high as $7.5 million next year without the hiring freeze and cost-cutting measures. During Tuesday's meeting, the City Council unanimously voted to receive and file the annual report and to create a new subcommittee that will develop financial options for the city to reduce the growing deficit. Council members David Gafin and Mario Guerra will both serve on the committee. However, despite the large decrease in revenue, the city's general fund still holds approximately $34.2 million, a reserve that keeps the city afloat while officials wait for sustainable economic recovery.
********** Published: February 26, 2010 - Volume 8 - Issue 45