Beverly Hills Anticipates Budget Deficit

City officials anticipate a $2 million deficit for the upcoming fiscal year in the general fund, the resource that pays for public safety and other community services and which presently totals $157 million.

City Treasurer Eliot Finkel shared the city's financial analysis on Wednesday with the Citizens' Budget Committee, a panel of residents and people who do business in the community.

The city's expenditures will outpace flagging revenues without further cuts or significant new sources of income, Finkel told the panel. The anticipated $2 million deficit was forecasted when the City Council approved its 2010-11 budget and may fluctuate when actual figures are available in March.

Because state law requires the city to approve a balanced budget each fiscal year, Finkel told committee members that keeping the city in the black leaves officials with only three options: increase taxes, cut spending or bring in new businesses to bolster the revenue base.

Beverly Hills requires a two-thirds majority vote to enact tax increases; Finkel said that was unlikely to happen.    

New businesses could generate more revenue, but are often accompanied by corresponding land development projects which  often create controversy in the community, Finkel noted.

"Assuming that we don't do either one of those (raise taxes or generate new revenue), we must face continuing cuts in the services that we provide," he said in a video preceding the committee's discussion.

Major budget reductions began in fiscal year 2008-09, when Beverly Hills cut $4.8 million, according to Finkel. Last year, $18.4 million in spending was cut, with another $8.8 million projected for 2010-11.

The nationwide economic recession has led to shrinking revenue and budget challenges for municipal governments, Beverly Hills included.

Committee member Edward Brown, a real estate professional and former Beverly Hills mayor, said the city needs to find new ways to generate revenue. As the economy improves, he said as an example, so will revenue from first-floor retail stores.

Still, all members of the committee acknowledged that budget cuts will be the primary route to fiscal soundness. 

Last week, Noel Marquis, the city's assistant director of finance, reported to the City Council that city agencies have reduced expenditures by $8.8 million for the fiscal year 2010-11. There were 68 city jobs eliminated last year and non-safety employees were furloughed during the winter holiday season.

"It's an achievement of not only the budget team of the city and the direction of the City Council, but every single employee of the city making sure that they stuck to that budget," Marquis said.

Ballot measures debated

Finkel also discussed local ballot measures O, 2P and 3P. Measure O increases taxes on oil and gas extraction and the others deal with public parking structures primarily in the Golden Triangle shopping district.

According to Finkel, Measure O seeks to impose on oil and gas producers a $2,000 flat tax plus 2.5 percent of the cost of each barrel of oil or unit of natural gas extracted from wells located beneath Beverly Hills. 

Activist Ted Green, campaign director for No on Measure O, questioned committee members about the ballot initiative and its effects on the community and petroleum industry. Green said his campaign is funded by companies that would be impacted if the measure passes.

"Measure O is a 500 percent energy tax that would increase costs for thousands of Beverly Hills residents, including churches, temples and schools," Green said. "It would lead to higher gasoline and natural gas prices and increased energy costs."

Finkel disputed Green's charges, saying the effect on oil and gas producers would be "nominal." While asserting he neither supports nor opposes the measure, Finkel estimated that Measure O would bring $1.3 million into city coffers, well above the $166,000 generated under the city's current oil tax policy.

"This is one opportunity to try and increase revenue and fight the current budget crisis," Finkel said.

The committee's meeting was the beginning of a process that leads in June to the City Council's final vote on the coming fiscal year's budget.