City had only $1.7M in reserve on June 30
Andrew Edwards, Staff Writer
Posted: 08/29/2010 09:49:33 PM PDT

SAN BERNARDINO – Budget reserves are so low that City Treasurer David Kennedy says there was no real alternative to the latest round of budget cuts.

San Bernardino officials have yet to complete their accounting of the past fiscal year, but they expect to find the ending fund balance as of June 30 was a mere $1.7 million.

“The general fund is near zero,” Kennedy said. “How can you be any worse than that?”

The $1.7 million is far below what the city’s auditing firm, Rogers, Anderson, Malody and Scott, reports that the city should have. The city needs $23 million, or roughly enough to pay for two months of city operations, a firm representative reported during the

Aug. 23 meeting at which the City Council approved deep budget cuts.

Those cuts – projected to result in more than $11 million in spending reductions by July 2012 – in Kennedy’s estimation are the product of years of “spending money we don’t have.”

The council approved the new cuts by a 4-3 vote. The spending reductions include cuts the council had avoided even during the past three years of belt tightening that followed the housing bust.

New budget cuts could lead to roughly 40 layoffs by July, depending on how retirements and job changes shake out.

Whatever happens, the potential layoffs include 27 police officers and four firefighters. Reducing public safety staffing is one of the most unpopular decisions a city council can make.

Asking for new taxes is one of the few moves that can rival laying off “badges” in terms of unpopularity, but Kennedy says that is San Bernardino’s situation.

“Frankly, we need to find new revenue,” Kennedy said. “My hope is after we have hemorrhaged all these jobs, people will be horrified,” he said.

In the run-up to the new round of budget cutting, San Bernardino’s council rejected multiple tax proposals.

One idea, an expansion to the city’s utility user tax, was rejected almost as soon as it was proposed. City leaders spent more time discussing hikes to the real estate transfer tax and sales tax, but the council voted to kill both proposals before either could end up on the Nov. 2 ballot.

Aside from taxes, the San Bernardino council has also considered a proposal to allow the Police Department to recover costs by establishing its own vehicle impound yard and charging fees.

Official estimates project the yard could recover more than $400,000 during the first six months of 2011. However, representatives of six towing firms with city contracts to haul vehicles for police have said the plan would hurt their businesses.

The companies already pay franchise fees of about $5,200 a month to City Hall. The council has delayed talks on the issue until late September.

Another revenue idea that’s on the table is a proposal to install parking meters around San Bernardino. The council has directed City Manager Charles McNeely to research that idea.

Cuts that could reduce the size of the police and fire departments are not scheduled to be completed until July 2011.

The intervening time may lead to tax ideas being debated for the June ballot. If so, the city would be asking voters who have lived through the hardship of recession to sacrifice more of their money to protect city services.

“I have a great deal of respect for Mr. Kennedy, but I don’t think taxes are the way,” 5th Ward Councilman Chas Kelley said. “Especially in this down economy.”

Kelley voted against the last round of budget cuts. He supports parking meters and opposes the impound yard. He did not readily describe a comprehensive alternative to budget cutting and taxes.

San Bernardino is not the only Inland Empire city to experience disappearing fund balances and reserves.

Whereas San Bernardino’s $1.7 million balance worries Kennedy, that number is actually much higher than the reported figure in neighboring Colton.

Colton started fiscal 2011 with a general fund balance of a little less than $70,000. The city’s budget projects a balance of about $264,000 at the end of the fiscal year.

In Redlands, elected officials and city administrators worried about dwindling savings even before the economy fell apart.

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