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Signal Editorial Board: Balancing took careful planning

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Posted: June 13, 2009 7:04 p.m.
Updated: June 14, 2009 4:55 a.m.

How bad is the economy? If you only read our headline earlier this week about a "$68.6 Million Budget Reduction," you would think it is so bad that the city of Santa Clarita is slashing its budget by nearly one-third - from $241 million last year to just $172 million for the fiscal year starting July 1.

With that kind of cut you would be hearing about deputy sheriff and city staff layoffs, city parks being closed and community programs and services being slashed.



Some of those things might be happening in other California cities - but not in Santa Clarita.

This will take some explaining, and we don't even have to get into budget-speak to do it.

The simple truth is that there are two important and different sets of numbers in the city's $172 million overall budget figure.

One is the capital-project portion. That's all the new municipal "stuff" you see around town like bridges, community centers and bus maintenance yards.

These projects are largely funded through dedicated money - dollars that accumulate and can't be spent on anything else, such as developer fees and federal highway funds.

Then there is the city's general fund. That's the money that comes from the sales tax when you buy a dress at the mall or a hybrid car on Auto Row - as well as from a portion of your property taxes, and from a dozen smaller sources.

The general fund is just that. It pays for "general" operations - police and fire protection, park and street maintenance, city staff and so forth.

To conflate the two would be to mix apples and oranges.

The bulk of the so-called "budget reduction" is on the capital side.

Simply put, the city budgeted for and built more one-time "stuff" this past year than it usually does.

For instance, it budgeted $22.5 million for the bridge work you see in the riverbed at the end of Golden Valley Road. It budgeted $13 million for the expansion of the Santa Clarita Sports Complex. It budgeted $15.4 million for the improvements to freeway undercrossing at Magic Mountain Parkway.

The city won't be doing that this coming fiscal year. Also because it knows the money won't be there, it's putting some major projects on hold.

The city still will spend $28 million from 25 different funding sources on 42 new capital projects in the fiscal year 2009-10, but that's a dramatic decrease from 2008-09.

The "reduction" in the number of new projects accounts for the lion's share of the $69 million "budget reduction."

By far what is most important is the status of the general fund.

The city knew a hit was coming. Last fall it was evident that the municipal coffers wouldn't be as fat as they had been during the real-estate bubble. Now, people were losing their homes and their jobs and they stopped spending money.

Sales-tax revenues fell off immediately, with property-tax revenues close behind.

The city predicted a 16 percent shortfall in year-over-year operating revenues, so City Manager Ken Pulskamp put his team to work.
"Cut your budgets," he told his department heads - or words to that effect - "and make it invisible to the public."

At Tuesday's City Council meeting, Pulskamp credited his entire staff with putting on its collective thinking cap and implementing operational efficiencies to internalize half of the shortfall.

That left a reduction of 8 percent, or $4 million, for Pulskamp to deal with.

He implemented a hiring freeze, leaving 20 positions unfilled; and probably for the first time in the city's 23-year budgeting history, he reduced the general-fund contribution to capital projects to zero.

If it seems Santa Clarita got off easy while other cities are trying to figure out how to keep the lights on, it did. And it wasn't dumb luck.

Pulskamp and his senior staffers - Assistant City Manager Ken Striplin, Treasurer Darren Hernandez, Paul Brotzman in planning, Rick Gould in parks, Robert Newman in public works - are prudent fiscal managers who laid the groundwork for this sort of economic eventuality all along.

Other cities pad their payrolls during fat times, sticking themselves in the sorry position of having to lay everybody off whenever the bubble bursts - not Santa Clarita.

Pulskamp doesn't hire a bunch of staffers when times are good. Instead he hires contract labor - i.e., consultants with specialties in particular areas - to perform specific tasks. That way, when the belt tightens, he doesn't have to lay people off and get in dutch with the labor unions. He simply hires fewer consultants and takes more tasks in house.

That sort of advance planning has enabled Pulskamp to deliver a budget that is both on time and in balance - with a $10 million rainy-day reserve, to boot. (Shhh. Don't tell any of the elected officials it's pouring right now.)

Meanwhile, Santa Clarita maintains its reputation as a business-friendly city. As bad as the economy is, we sidestep business license fees and utility-user taxes and other means politicians elsewhere routinely use to balance their budgets on the backs of business.

It's actually the opposite here. With a keen eye on the near-term difficulties ahead, Pulskamp and his team crafted a 21-point plan to improve business conditions in the long term - everything from subsidizing film production and other clean industries that have a positive ripple effect on our economy; to helping businesses take advantage of the tax relief available to them through our enterprise zone status; to a marketing campaign teaching people the ramifications of thinking "Santa Clarita Valley" when deciding where to hire, shop, dine or entertain.

No smoke and mirrors. No fooling. Want proof? While California's bond rating slips nearly to junk status - falling below hurricane-ravaged Louisiana in February for undisputed last place in the U.S. - the city of Santa Clarita learned Tuesday that its bond rating has been upped to the second-highest possible level, or AA+.

If we sound like we're bullish on Santa Clarita and the leaders who are steering our city straight through these turbulent waters, color us guilty.


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