Sandra Emerson, Staff Writer
Created: 11/09/2010 04:49:24 PM PST

UPLAND – The city’s finance and economic development committee today will discuss ways to address replenishing $1.3 million taken from the general fund reserve to cover legal and pension-related costs.

The three alternatives include using money from the redevelopment agency fund, or from the gas tax fund, or cutting 12 full-time positions.

The Upland City Council approved a balanced budget for the 2010-11 fiscal year in June but will consider the committee’s proposed cuts at the Nov. 22 council meeting.

“We have a balanced budget in the current year, however we needed to use our reserves to cover some things the city got hit with such as unanticipated legal bills and the fact that we need to fund our post-employment benefits at a higher level than in the past,” said Stephen Dunn, the city’s finance director.

City policy calls for 25percent of operating expenditures to be held in reserve, which equates to $9.5 million. The fund balance currently rests at $8.2 million.

The city has spent nearly $3 million in litigation costs for three cases.

Sales tax is down by $600,000 from the 2009-10 fiscal year and property tax is down by $800,000.

The reserve policy has proven to be valuable, said Councilman Brendan Brandt, chairman of the committee.

“This gave us now the flexibility of putting money in the reserves or bank account like most families do,” he said. So “when we have something that comes up…you don’t cut vital city services like police and fire, water – all those good things that we will continue to provide at the highest level.”

Budget updates typically occur in February, but due to the city’s financial challenges, staff decided to bring recommendations to the council earlier.

In addition to replenishing the money borrowed from the reserve, the city needs to put money back into the self-insurance/risk management fund, which accounts for insurance, claim settlements and legal costs.

Legal costs totaled $900,000 higher than budgeted.

Alternative A identifies just more than $1 million in general fund budget reductions and the use of $716,000 in redevelopment money.

The redevelopment money has not been assigned to projects or programs, Dunn said.

Alternative B also identifies just more than $1 million in reductions to the general fund and includes the deferral of $684,000 in gas tax funds.

The gas tax funds are tied to street improvement projects and would be used to backfill street maintenance costs paid by the general fund.

Alternative C would cut $1.75 million from the general fund and eliminate 12 full-time positions.

The layoffs would provide the city with a more permanent solution, whereas the use of capital improvement money relies on an increase in revenues, Dunn said.

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