Pasadena is running a budget deficit. Wait until California's Cap and Trade law kicks in and business activity declines and with it taxes. Read below
Big deficit expected to grow
Projections call for an $8.3M shortfall in the 2012-13 Pasadena budget.
Officials are looking for ways to trim $3.6 million more from the city’s 2012-13 budget as revenue falls short of expectations and health-care costs for workers increase.
With the economy stagnant and the state in dire fiscal straits, city leaders had planned for a $4.7-million deficit next year, Pasadena Finance Director Andy Green said. But revised projections released last month bumped the gap to $8.3 million. The city’s overall General Fund budget is $215.8 million.
City department heads are examining options to present to the City Council — including possible layoffs — to close the gap.
“Nothing is being held back as far as recommendations to the council,” Green said. “I can’t say for sure [that layoffs are] not going to happen.”
The City Council is expected to vote on proposed cuts Nov. 28, officials said.
Declining sales and utility tax revenues are major factors hurting the city’s bottom line.
City officials originally projected sales tax revenues of $31.3 million, but now have lowered that estimate by $1 million.
Sales tax revenues were about $29 million in the 2010 and 2011 fiscal years, the lowest since $28.4 million in 2002. The effects of the recession are lingering longer in Pasadena than elsewhere, Green said.
“Sales tax in the city of Pasadena has really taken a beating in the last couple of years, whereas surrounding cities like Glendale seem to be coming out of that,” Green said. “Pasadena has yet to show sustained increases.”
The city lost 11 auto dealerships in the past 10 years, spurring a 31% decrease in taxable sales from what was once the city’s highest-producing retail sector.
“The city was trying to make an effort to keep the auto dealers here, but the economy chased them away,” Green said. “That decline is going to be a continual hit.”
The city had also anticipated $32.6 million in revenues from its utility users tax, which is applied to residents’ use of water, electricity, telephone and cable service. Under recently revised figures, the city now expects only $30.2 million.
The drop in water-related revenue is a product of the city’s success in convincing residents to conserve water.
“That’s the challenge,” City Manager Michael Beck said. “But you still want to encourage people to save water.”
As officials deal with a loss of revenue, employee health costs are on the rise. Pasadena officials are anticipating an 8.5% increase in 2012. The city paid an increase of $1,064 per full-time employee in the past two years, according to a report from PricewaterhouseCoopers.
City leaders are not looking forward to the prospect of reducing staff. In the past three years Pasadena has eliminated 286 positions.
“We’re at a point where the next level of reductions are going to be difficult for us,” Beck said.