3/6/08
A downturn in gross receipts revenue has plunged the city of Española into the red by about $1 million and forced administrators to propose cuts to just about every department in the city.
Revenues for the city were budgeted to come in at about $10.8 million, but after a sluggish first half of the fiscal year, city officials have proposed reducing the budget to $9.8 million to cover the losses.
That $1 million difference was made up for largely through cuts to a majority of the city’s departments. Some of the highest cuts in the proposed budget came in the Public Safety, Jail and Recreation departments (see sidebar on page A3).
The rest of the revenue shortage may be covered by a surplus of $899,200 that was carried over from the 2007 fiscal year. With the budget revisions, the city’s budget would be balanced with about a $20,000 surplus for any unexpected expenses and $866,058 in cash reserves, as required by the state Finance Administration Department.
City Water Department Director Marvin Martinez said he was unsure if the city would pull money from the water utility fund as it has done in the past and said he was scheduled to meet with City Manager Gus Cordova later in the week.
In the past the water utility fund has served as a safety net in times of budget troubles. In Fall 2007, the fund was tapped to cover lawsuit settlements paid out of the city attorney’s budget, which went overbudget long before the fiscal year’s halfway point. The fiscal year runs from July 1, 2007, to June 30, 2008.
Martinez and Cordova both said the water fund would be needed to supplement the city’s low revenue.
Although the budget adjustments are not final, as they still require council approval, Chief Financial Officer Elias Martinez met with each department director to decide what could and could not be cut.
Martinez will present his proposed adjustments and cuts to the council at its March workshop meeting and the final cuts will be voted on at the council’s regular March meeting.
Public Safety Director Julian Gonzales said he would try to convince the council to reexamine the cuts made to his budget as they would prevent him from replacing aging police cars. Gonzales’ department is also understaffed by about 11 patrolmen.
“I had some savings from vacancies,” Gonzales said. “I was planning on buying equipment and some more cars, but if these cuts stay, I’m not sure I’ll be able to do that. We need the cars, too. Our cars are past their mileage; they’re breaking down.”
Gonzales said he knows the city is going through lean times with its budget, but said the cuts to his budget could affect officers doing their job and should be reevaluated.
“It’s not set in concrete,” Gonzales said. “I understand the city is in economic straits, but I’ve made it known to the Public Safety Committee that we need to look at these cuts before they give their blessing to anything.”
Other department heads said they worked with Elias Martinez to identify money that they could do without.
“If we had items that we already had used and had extra money for, or things that we hadn’t used the money budgeted, we gave it up,” Jail Director Ted Garcia said.
Mayor Pro Tem Alice Lucero said Public Safety was not one area where she wanted to make cuts, considering that many of the current councilors have touted the issue as one of their top priorities.
“Being the largest department, it looks like they have the most money, but they don’t,” Lucero said. “They have a lot of needs.”
Lucero said when she spoke with Martinez about the budget cuts, she asked him to try and limit the cuts made to the Public Safety budget.
“When (Martinez) talked to us about the budget, we said he needed to figure something else out to not cut Public Safety,” Lucero said. “There are other areas where we can make cuts, like travel or supplies, for example. I’m not sure if there are other departments with a lot of extra money. They’ve all been holding back.”
In the previous three fiscal years, the city’s gross receipts tax revenue had grown at a rate between 2 and 5 percent. In fiscal years 2004 and 2005, the revenues grew by about 5 percent. The next year it grew by about 5.3 percent, but in the 2007 fiscal year the growth rate dropped to about 2 percent.
Many councilors and city administrators blamed the drop in revenue to the overall state of the economy, both on the local and national levels.
“Nationally, there are a lot of things going on that are affecting us locally,” Lucero said. “I think people are still scared from the (Los Alamos National Laboratory) cuts. That and gas prices that keep increasing. People are holding back. People have to pay their gas bills and don’t really have extra money to spend.”
The U.S. Congress was considering slashing the budget for the Lab’s budget before it decided to restore cuts as part of a major spending bill.
The Lab called for voluntary layoffs as part of its plan to compensate for its troubled budget. About 750 employees decided to leave and take the Lab’s incentive package offered to those who left early.
Although the scare of massive layoffs at the Lab were averted, the effects of the employees who left early has yet to be seen.
In the current fiscal year, the city budgeted for an increase of $930,371 in gross receipts revenue. The city budgeted for about $8.8 million in gross receipts tax revenues this fiscal year, despite receiving about $7.9 million in gross receipts in the previous fiscal year.
“The budget was built on projections that didn’t come in,” Elias Martinez said. “The (gross receipts revenues) have been flat.”
Elias Martinez said the growth projection could be thrown off by a lot of unforeseen factors and that when setting a budget, it’s difficult for administrators to predict a downturn in the economy like the city is currently experiencing.
“The growth projection was a little high,” Martinez said. “But when you’re setting a budget, you can only work with your best estimates at the time. I don’t think it was out of line.”
The city’s revenues are down largely because of the lower-than-usual gross receipts tax revenue, which makes up for about 85 percent of the city’s revenues, but other revenues have also been declining.
Building permits were budgeted to bring in about $90,000 for the year, but have only brought in $23,846 thus far. The budget was lowered by about $35,153.99 to make up for the low revenue.
“Those are usually two good indicators of where the economy’s at,” Cordova said of the gross receipts tax revenue and building permits. “In this case, they show things aren’t really going that great.”
The expected budget for municipal court fines was also lowered to make up for the falling revenues, which came in about $20,000 of what was budgeted.
Accounting Systems Coordinator Josie Lujan said revenues brought in by the court are connected to the staffing levels at the police department which have resulted in fewer arrests.
Councilor Danielle Duran said the city should have handled its finances better when the economy was in good shape in order to prepare for the times when it wasn’t.
“Yes, I’m worried about the budget, but we should’ve been worried for years,” Duran said. “When the economy was terrific money was mismanaged, nothing was done. So when we got into office there was almost no liquidity for the city, we had all this money tied up with bonds and loans.
City administrators said the drop in the city’s revenue has been cushioned by low expenditures.
The city’s expenditures are down by about $98,236 in the general fund, or about 2 percent, according to city documents. In the city’s overall budget, expenditures are down by $2,684,774, which comes out to about 29 percent less than last fiscal year.
“We could tell in the first three months (the gross receipts tax revenue) was flat,” Cordova said. “I asked all the department heads to acquire only what they needed and keep their expenditures down.”
Cordova said he waited to take any drastic action initially because he wanted to wait and see if revenues picked back up later in the fiscal year.
“It’s easy to have a knee jerk reaction and tell everyone the sky is falling, but we told everyone to just keep their expenditures down and we’ll see what happens,” Cordova said. “You expect curves and valleys. We were expecting a spike, but we never saw it, they just stayed flat.”
In looking to the second half of the fiscal year, Martinez and Cordova said they expected city revenues to remain flat and created the revised budget accordingly.
“I have nothing to hang my hat on that it will rebound,” Cordova said. “So we assumed it would be flat for the next six months.”