City general fund revenues in the first quarter of 2009 were $113,000 below budget because of lower sales tax and construction revenue - which would equal $512,000 over the entire year, administrative services director Karen Goschen told the city council during its Monday study session.
"That's pretty significant," she said.
City staff has identified only $61,225 in spending cuts that leave the general fund's ending balance at $792,000, not the desired $1 million, Goschen said.
The fund's beginning balance is $1.21 million, which partially will offset the declining revenue, Goschen said.
But unless the economy improves in the next couple of months, the city must consider reducing services or transferring money out of the capital projects fund to the general fund, she said.
Goschen said the city's general fund revenue is as much as 30 percent below budget for the first quarter, or $113,000, because of lower sales tax revenue and slower construction, but there's nowhere to cut.
That's "pretty significant" since it would equal $512,000 if the revenue decline continued at the same rate for the whole year, she said.
Goschen said staff recommended making the $61,225 in spending cuts, setting a $750,000 general fund balance instead of $1 million but not reducing services yet and monitoring revenue monthly.
The recommendations included adding $35,000 for consultants to work on the sub area plan and encouraging affordable housing.
The $792,000 ending balance for the 2010 general fund is still good, based upon what it's been in the past, she said.
Councilor Susan Lorenzen questioned paying for the sub area plan and affordable housing consultants in times like these.
Councilor Paul McHugh said he supported the recommendations but wondered how else the city could fund the real estate excise tax money being used for impact fee studies.
Goschen said real estate excise taxes are 60-percent lower than budgeted but none of the impact fee studies have come to the council.
Councilors can look at the big picture on those later, she said.
McHugh also asked, "If we have a $1 million general fund balance, are we really talking about (cutting) people at this point?"
Labor is 70 percent of the city's costs, so it's a huge expense, Goschen said.
The only additional revenue would be from increasing the city's utility taxes that don't have a statutory limit, she said.
Mayor Laura Dubois said she supported the recommendations because they sound reasonable and no one knows how long the slow economy will last.
Councilor Erik Erichsen said he didn't like adding funding for the two consultants, but Councilor Ken Hays said those studies will be important for when the economy turns around.
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Karen Goschen, Sequim administrative services director, recommended these cuts in city spending, among others:
_ Use hotel/motel taxes to pay police and public works costs for the Irrigation Festival, saving $13,725.
_ Reduce police department executive assistant to half-time, $25,000.
_ Reduce general fund transfer to street fund, $40,000.
_ Cut proposed citizen survey, $10,000.
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