CITRUS HEIGHTS, CA (MPG) - At a special meeting on January 28, 2021, the Citrus Heights City Council held a Study Session to review the City’s financial position and consider solutions for balancing the budget.

The City has long expected a budget shortfall when expenditures will exceed incoming revenue. The Revenue Neutrality agreement between Citrus Heights and Sacramento County stipulated that after incorporation the City’s property taxes be allocated to the County for 25 years. That agreement expires in fiscal year 2022-2023, with the City set to begin receiving property tax funds in February 2023.

But the projected revenue from property taxes will not fill the City’s budget gap. City Manager Chris Boyd explained that other factors along the way—the Great Recession in 2008, the rise of online shopping in a “retail sales reliant city,” and the current financial downturn caused by the COVID-19 pandemic—have had significant, negative impacts on the City’s finances. As a result, some vital expenditures have been delayed, like the much-needed repair of the City’s roads.

In order to fund necessary infrastructure repairs, while continuing to fund services and keep operations running smoothly, the City needed a new source of revenue. The proposed sales tax increase on the ballot last November was the City’s solution. But the measure failed to garner a majority.  So, Boyd explained, “We find ourselves now in a place and a time where we need to make some difficult decisions.”

Without a new revenue source, the only option is to reduce the City’s budget. “The numbers are difficult; the gap is large,” said Boyd. “But we do have proposals and strategies to close that gap, but what that leads to is, ultimately, staff reductions and service reductions.”

The General Fund budget is $34.4 million, with 75% going to personnel and 25% going to operational costs. Of the personnel funding, 66% is allocated to the Police Department and 34% to City Hall staff.

For the current two-year budget cycle, the impact of the pandemic caused a fall in revenue of more than $1 million and an increase in expenditures of almost $1 million. This increased the projected operating shortfall from $1.7 million to $3.7 million. To reduce this deficit, the City kept staff vacancies open (28 positions at the Police Department and nine positions at City Hall) and corresponding services were reduced—achieving a $3.1 million reduction in expenditures. The City also received just over $1 million in Coronavirus Aid, Relief, and Economic Security (CARES) Act funding reimbursement. Staff is now projecting the City will end the fiscal year with a small surplus. But to maintain a balanced budget in the coming years, the staff and service reductions must continue.

The service reductions at City Hall include reduced staff training, reduced community engagement, reduced economic development and communication programs, delay in processing development projects, delay in response to public calls and emails, and reduced ability to pursue grants.

With so many vacant positions remaining unfilled, the Police Department doesn’t have enough officers to staff all their units. They’ve been forced to suspend or eliminate many Youth and Family Services programs as well as the Special Investigation Unit (which focused on drug crime, gang activity, and other serious offenses). Those officer positions have been moved into the Patrol Unit, which is still significantly understaffed. As a result, they’ve had to reduce Patrol Operations, leading to increased response time and increased burden on patrol officers. And reduced staff in the Records Unit means increased wait times for citizens in the Police Department lobby as well as a delay in criminal filings, warrant preparation, and responding to report requests.

To balance upcoming budgets, even more staff and service reductions will be needed in coming years—including an additional five vacancies at the Police Department (which will affect the Problem Oriented Policing Unit, the General Investigations Unit, and the Traffic Unit). So far, no layoffs have been needed, but there is a possibility they will be necessary in the future.

Councilmember Tim Schafer referred to the update as “doom and gloom.” He asked if the data represented “a worst-case scenario,” suggesting the economy could rebound more quickly than expected, leading to a more optimistic outlook this summer if the City receives more federal funds.

City Manager Chris Boyd said, “We are not counting on that,” stressing that there is no certainty that the City will receive additional stimulus funds.

Councilmember Jeannie Bruins said, “We have to stand on our own. … It’s hard to look at. It breaks my heart in many ways, but I just know that our staff has done everything they possibly could to give us real numbers and a real solution. From here, we go forward with what we have to do.”

Councilmember Porsche Middleton agreed: “This is not new to us. We’ve been seeing this trend since early last year, and we knew that we were going to get to this point where we’re going to have to make some serious cuts. … We don’t really have a choice in this. We can’t make any magic money appear.”

Mayor Steve Miller said that he wouldn’t have supported the sales tax increase if he didn’t believe it was necessary, and without that revenue, cuts must be made. Although he expressed surprise and disappointment that a majority of Citrus Heights residents voted against funding the police department and road repairs, he said he respected their choice. “So, on we go, and this is very tough. It makes me sick to my stomach to have to do, but it’s not scare tactics.” Miller said it is the “reality that we have to all deal with.”

Staff will now begin working on budget development for the 2021/22 – 2022/23 budget, with Council review scheduled for May.