Facing deficit, city considers salary cuts

Expecting a budget shortfall greater than its $11-million estimate, the Costa Mesa City Council on Tuesday night discussed adjusting city employees’ compensations, among other possibilities.

The shortfall could be greater than expected because current projections are based on predicted 10% decline in retail sales nationwide for the fourth quarter, which is a relatively small drop compared with other indicators, Finance Director Marc Puckett said.

“The chances of this number [estimated deficit] being much larger are pretty good,” Puckett said, adding that other estimates suggest a decline in sales as large as 14% or even 16%.

City Manager Allan Roeder said he is talking with union leaders who represent city employees — including police officers, fire fighters and staff members — to see whether they would be willing to reopen contract negotiations.

Several council members emphasized that salaries and benefits for city employees must be adjusted for the city to stay afloat financially. Costa Mesa withdrew $7 million from its savings to fill last year’s deficit. The majority of the remaining $66 million in savings is either restricted or set aside for other purposes.

If contracts are going to be opened up immediately, though, the unions must sign on. There are provisions that allow the city to reopen contracts if they can show a certain decrease in tax revenues, but the audited financial reports necessary to do that officially will not be ready for more than six months, according to finance staff.

However, Roeder expressed optimism that the unions would want to start talking once the city can provide some preliminary financial evidence that there’s a problem.

“Nobody wants to take a pay cut, but I think the associations acknowledge the situation and once we [prove it] I would hope they would be willing to open the agreements,” Roeder said.

Salary and benefits may be the best solution available if the city wants to avoid laying off workers, as it did the early 1990s during rough financial times, Councilman Eric Bever said.

Other means of raising revenue were also discussed, including the possibility of taxing residents for their use of utilities like electricity, water, gas, cable television and telephone service, but those would have to come further down the line because they would have to be submitted for voter approval.

Already, department heads have been asked to try to cut an additional 5% from their budget.

“We’ve got some difficult decisions to make,” Mayor Allan Mansoor said. “Relying on fund balance [savings] is completely unsustainable.”

Reporter ALAN BLANK may be reached at (714) 966-4623 or at [email protected].