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REQUEST FOR <br />COUNCIL ACTION <br />CITY COUNCIL MEETING DATE: <br />SEPTEMBER 19, 2011 <br />TITLE: <br />BUDGET STABILIZATION REPORT <br />i I <br />CITY MANAGER <br />RECOMMENDED ACTION <br />CLERK OF COUNCIL USE ONLY: <br />APPROVED <br />? As Recommended <br />? As Amended <br />? Ordinance on 151 Reading <br />? Ordinance on 2nd Reading <br />? Implementing Resolution <br />? Set Public Hearing For_ <br />CONTINUED TO <br />FILE NUMBER <br />Direct the City Manager to implement a budget stabilization plan based on the framework of a <br />four-pronged approach that includes: <br />1. Negotiated compensation reductions <br />2. Outsourcing services <br />3. Restructuring and service reductions <br />4. Revenue increases <br />DISCUSSION <br />Like many cities, Santa Ana has been severely affected by the economic recession. Major city <br />revenues, including sales tax, property tax and the utility users' tax have declined. In addition, <br />the State has balanced its budget by taking local government monies causing further decreases <br />in the City's ongoing revenues. Further, the nationwide financial collapse has severely affected <br />the City's PERS rates which have increased significantly over the last few years. <br />To respond to these revenue losses, the City has made reductions in its staffing levels and in <br />employee compensation. Since 2009, the City reduced its staff by 390 positions through attrition, <br />outsourcing, reorganizing and layoffs. The City also renegotiated its compensation agreements <br />with its employees to eliminate or defer raises, and to increase employee contributions toward <br />benefits and retirement. Work furloughs were also implemented. Despite these reductions, <br />expenditures have continued to far exceed revenues. <br />Management Partners was hired earlier this year to review the City's budget and to make <br />recommendations for a budget stabilization plan. The purpose of the consulting firm's review was <br />to identify ways to reduce costs and increase revenues to align the City's expenditures with its <br />recurring revenues. This staff report incorporates some of the key findings of the study and <br />presents staff's recommendations for implementation of a budget stabilization plan. <br />60A-1