Due to the national economic downturn, Simi Valley's coffers have experienced a larger than expected drop in revenues compared to the same time last year, leading officials to prepare for cutbacks in programs and services citywide.

"We certainly projected that there would be a downside to the economy, but no one projected it to this degree," City Manager Mike Sedell said. "We are in good fiscal condition compared to most cities, but we are not immune from the economic downturn and we will feel it."

At Monday's City Council meeting, staff members presented a first quarter report for fiscal year 2008-09 in order to update the council of the city's financial position.

Already this quarter, revenues are 18.3 percent below the budget projection, Deputy City Manager Frank Catania said.

"This is indicative of the economic downturn that is primarily the result of a falling housing market, a mortgage crisis and a financial markets crisis that have negatively impacted many of the city's sources of revenue," Catania said.

While the city has seen a decrease in sales and property taxes—some of which was expected because of less development—the city also been hurt by reduced interest rates.

Sedell said although most residents don't realize it, low interest rates hurt the city. If interest rates come down this year to 2 percent as expected, the city will lose $2.8 million of interest income on its $140 million investment pool.

Increasing utility and fuel costs also hurt the city's budget, just as they hurt Simi families' pocketbooks, Sedell said.

General fund expenditures are 2.6 percent below the first quarter estimate, but based on historical trends, expenses should be nearer to the budget amount by year-end, Catania said.

Personnel expenditures are slightly below the first quarter estimate, mostly due to salary savings resulting from vacancies and deferred recruitment.

According to Dan Paranick, assistant city manager, of the city's 665 authorized positions, 77 remain vacant.

"A portion of those vacancies are vacant due to turnover but the majority are being held vacant to achieve expenditure savings for the city," Paranick said.

The largest number of vacancies is in the public works department, where 32 of the 225 authorized positions are empty.

"We've managed to get by with less people because, frankly, people have been working a lot harder," Sedell said. "People in the organization have really stepped up to the plate to deliver the services to the residents so they wouldn't feel the impacts."

In response to the report, the council directed staff to identify certain programs and services for possible budget cuts that will be considered in February as part of the mid-year financial report.

Sedell said Wednesday that no specific programs have been targeted yet, but that he will be meeting with department heads to review all city services.

"There are no sacred cows," he said. "Everything's up for discussion."

Recommendations for cuts will be based on what will result in the least disruption of services for citizens, he said.

While municipalities across California are feeling the economic crunch and are anxiously waiting to see how the state's actions will affect local budgets, Sedell said Simi Valley remains in better financial shape than most cities because it has been planning for the downturn.

"The earlier you make the cuts, the less of an impact you are going to have to your budget," Sedell said. "And the sooner that we implement the savings program, the more palatable they are in terms of impacts on the community."

Mayor Paul Miller said it will be difficult for the council to make cuts because it views every city program as important.

"I don't think this council funds anything that's frivolous," Miller said. "So anything they are going to come back to us with as a suggested cut is going to be something that we are going to have a hard time dealing with."

He said that this is a time when the city's "rainy day fund" might be useful in order to preserve a service that the City Council feels is vital to the community.

Councilmember Steve Sojka agreed, saying that the council should consider tapping into the fund since it was created for economic times such as the one the city is currently facing.

"It's there for a reason, it's good to have, but in these times I think that's where we need to look at how are we going to utilize this?" Sojka said.

Councilmember Glen Becerra expressed hesitation about using the rainy day fund because he says it should only be used in times of natural disasters.

"I just want to be very careful with the way we do this," Becerra said.

Though the report painted a grim financial outlook, Sedell said the city will survive the recessionary period.

But he also pointed out that it will take quick action and tough choices to manage the change that the city will experience over the next two years.

"I would not say the sky is falling," Sedell said. "However, it is some pretty turbulent times ahead and we need to brace for that."