[Editor’s Note: City Councilman Andy Weissman was one of four community leaders who addressed the Culver City Democratic Club last night on fiscal matters, and he penetratingly analyzed City Hall’s financial predicament.]
Thank you to Bill Wynn for the invitation to visit with you tonight.
I want to give you some background, my perspective and when time allows, try to answer questions.
It is no longer news that Culver City has been negatively affected by the severe recession. After many years of consistent growth, our revenues plummeted by over $2 million between Fiscal Year 07/08 and 08/09.
We’ve seen car dealerships and retailers such as Circuit City close their doors, proliferating for-lease signs along our commercial corridors, permit and developments fees lost because projects are scrapped or put into hibernation, and business tax receipts decreased because of the general economic downtown.
Add to the mix the dramatic losses suffered by Calpers, the California Public Employees Retirement System, and ever increasing costs of medical benefits provided to retirees and you have what the three new City Council members who were elected and sworn-in in April 2008 characterized as the “economic perfect storm”.
Welcome to elected office. Then it got worse.
We have been actively engaged at a number of different levels over the past two years in trying to not only right the ship and maintain the status quo, but to create an environment that will enable Culver City to not only survive the economic downturn but to prosper and grow as conditions improve.
Our current fiscal year’s budget took significant measures to reduce expenditures, including the elimination of 60 positions out of a work force of about 720. Still, we have a significant gap between revenue and expenses.
Even with the projected gradual return of the economy and increasing revenues, both areas in which we are seeing glimmers of improvement, without further action on our part, this gap is projected to rise dramatically to upwards of $8 to $8.5 million annually when you include our unfunded pension and medical retiree liabilities.
So what do we do? We can increase revenues, reduce expenses or do both.
Sales, utility user and business license taxes are our major areas of revenue generation. You may not know that we are a very low real property tax city. Unlike Los Angeles, which gets nearly 28 cents on every dollar in real property tax, Culver City, by popular vote back in the ‘60s — and some of you may even have voted for it — voted to reduce the amount of real property tax that the city receives to 10 cents on the dollar in exchange for creation of the utility user’s tax. The declining economy brought a serious erosion of revenue, On the revenue side, revenues from business activity are slowly increasing, but very slowly. Given how far we’ve dropped, it will be years before we get back to where we were. Revenue increases in the form of tax increases… we don’t even want to go there. What about reducing expenses you may ask? As well informed and as involved as the Culver City Democratic Club is, this may not come as much of a surprise, but nearly 80 percent of the General Fund budget goes to salary and benefits. Two major components are increasing required contributions for employee pensions and the cost of providing medical benefits to retirees. Our city employees play a major role in our economic viability. We depend upon them to provide an extraordinary level of service to the community. We have come to expect that, and our property values are a reflection of that. But the current financial realities present us with an opportunity in Culver City to make some fundamental changes in the way we do business; opportunities that, in my opinion, we cannot afford to allow to pass.
What are we doing to address these realities? A couple of things, one you would fully expect and one, which if you’ve been following the news recently, is less expected but probably even more significant in the long term.
The expected: For the ‘11/’12 budget, the City Manager has required all departments to submit a budget that achieves a 2 percent decrease in the level of General Fund expenditures. The less expected but even more significant:
We are in negotiations with our bargaining groups to try and achieve concessions from the labor groups. This is the area where I think Culver City may separate itself from other municipalities.
I think this is possible because I believe our employees recognize the position the city is in financially. They understand what the city needs and why. I am hopeful our bargaining groups will be willing to do what is painful but necessary in order to be able to continue to provide the high level of service the community enjoys and has enjoyed for many years.
I think we all recognize the importance of success in these efforts. Without success, we have reached a point where further cuts cannot be sustained without noticeable effect on service levels.
Our bargaining groups know this. My colleagues and I thank them for their good faith efforts to manage our challenges without threats and recriminations.
We have an opportunity by working together to make the right decisions for the right reasons. If we are successful, we should be able to move forward with a minimum of employee dislocation and with little to no impact on the community in the form of city services.
I am confident that we will have the collective wisdom and fortitude to look to our future and in so doing help to preserve all that makes Culver City such a special community. Let me close with three points:
What I just mentioned does not factor in the potential loss of redevelopment as proposed by the governor. The Redevelopment Agency provides funding that offsets certain costs in the General Fund. If it were lost altogether, this could mean a hit of $3 to $4 million for the General Fund.
This also does not address the longer term problem of deferred maintenance, and investments that will be required in the city’s aging infrastructure and facilities.
And lastly, while the city is taking many steps to reduce costs, I think it is inevitable that we will at some point need to begin the discussion of increasing revenues (code for modest tax increase) in order to protect the services this community values and to ensure adequate resources to invest into our infrastructure and facilities in the future. Thank you.
