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Tuesday, Oct. 23, 2007

Sales tax short in Modesto, cuts ahead

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Modesto's budget picture continues to darken with a new forecast showing it collecting $1.2 million less in sales tax revenue than the city projected as recently as July.

The revised sales tax estimate adds to a financial shortfall that has the city looking to cut $8.8 million from its $135 million general fund.

Modesto could exhaust its reserve fund and slip $3.4 million into the red by the end of this budget year, according to a worst-case estimate that Finance Director Wayne Padilla gave to City Council members Monday.

That scenario is unlikely to unfold because the council next month is expected to see cuts that could keep the city's reserves at $9.1 million -- a figure that remains $1.5 million below Modesto's desired reserve level.

On Nov. 13, Padilla and the city's managers are scheduled to present $5.6 million in program cuts to the council. In addition, Padilla has identified about $6.3 million in new revenue and accounting changes that could spare some of the budget pain.

Some of the cuts are expected to come from police and fire services because public safety spending consumes about 70 percent of the strapped general fund.

City Manager George Britton said the proposed cuts fall "disproportionately" on other departments.

Padilla provided the council's Finance Committee more details on how the general fund's outlook worsened so quickly just one year after the same group gave the green light to a series of midyear expenses, such as $100,000 to market flights from the Modesto Airport.

That meeting was packed with arts supporters who wanted the council to spend extra money on their projects, while boosting funding to repair the McHenry Mansion's foundation.

Monday's meeting also was crowded, but with city executives and union representatives trying to make sense of Modesto's shrinking pool of cash.

All together, Modesto expects to earn $28 million in sales tax revenue this year, down from an original estimate of $31 million. That decline stems mostly from a drop in spending on big items such as houses, cars and furniture,

The city also faces:

• $1.5 million in extra salary spending related to promotions and contracts it has approved since July
• $1.3 million in costs associated with benefits that weren't being tracked earlier in the year.
• $1.4 million worth of work the council approved last year but didn't have to pay for until now.

Last year's spending also continues to haunt the city with:

• $2.6 million in allocations the council approved when the city held a better revenue outlook
• $2.7 million in one-time spending on roads and curbs the council wanted to undertake
• $2.2 million in spending related to new hires and unexpectedly low turnover that fit within department budgets.

Bee staff writer Adam Ashton can be reached at aashton@modbee.com or 578-2366.