10:00 PM PDT on Monday, April 26, 2010

By DARRELL R. SANTSCHI
The Press-Enterprise

The San Bernardino City Council resumes discussion tonight on how to plug a $24 million hole in its budget for the coming fiscal year that could widen to $188 million over the next five years.

“This will begin the most difficult discussion we will ever have,” Mayor Patrick Morris told the council at the start of last week’s budget study session.

Morris noted financial hurdles challenging cities throughout the region and the state of California’s budget trouble.

“We are not alone,” the mayor said, “but our problem is exacerbated by the fact that we have no reserve.”

City Finance Director Barbara Pachon said the council will have to cut an additional $2 million from its spending program for the fiscal year beginning July 1 if it wants to restore a modest reserve to its $149 million budget.

“I know this is not good information,” she said, “but that is where we are.”

City Manager Charles McNeely told the council in a written report that the budget deficit is being caused by “continued decline in sales tax, utility user tax and property tax revenues, as well as increases related to personnel compensation, retirement and other benefits.”

Pachon said the city’s economy has been hit hard by unemployment, which ballooned to 19.2 percent in February, and sales taxes that are down $16 million from 2005-06 and now are at their lowest level in 15 years. Home foreclosures also are shrinking property tax revenue.

“We were not prepared for such a severe downturn,” she said, and the city did not have a big enough reserve fund to carry it through the tough economic times.

Worse yet, McNeely noted in his report, the city has a “structural deficit” that could total $188 million by 2015.

Fixing that problem will require the city to find new sources of revenue and streamline its departments.

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