Aug 20, 2013 6:35 PM by April Hansen, KSBY

SM City Council discusses city's $5.5 million deficit

The city of Santa Maria continues to battle back from the recession.

The city council met to review its final financial report for the year and decide on how to trim down its $5.5 million budget deficit.

In the last five years, the city lost almost $10 million due to the recession.

If you read the report, the city seems to be doing well on paper.

Revenues are up, including sales tax and property tax dollars, but the problem is 90% of the city's expenses are personnel costs.

City Manager Rick Haydon says the main expenses are from retirement funds and healthcare costs.

When 70 city positions were cut in the past few years, the city saved about $4 million.

In the report, it shows police, fire, administration and mayor and council were all under budget this year.

Haydon says it looks promising but it's only because jobs were cut.

He says the city still needs to hire more police officers and firefighters.

Money from Measure U should help offset those hiring costs.

"One of the largest expense categories we have is retirement, and the public employment retirement rates are going up. They are going up substantially in the next two years and so as those go up our expense account goes up too," said Haydon.

The city predicts its personnel healthcare costs and retirement will increase by $1 million in the next few years.

City Manager Haydon says the council could decide to take $2.5 million from its LEAF fund to cut the deficit.

The LEAF account is basically the city's relief fund they set up years ago.

Haydon says the rest of the LEAF fund will help offset the deficit the city is expecting in 2014 because of healthcare cost predictions.




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