Amid tough times, city remains in the black
By Carissa Marsh cmarsh@theacorn.com

Despite taking in $500,000 less in revenues than expected during fiscal year 2007-08, city officials said Simi Valley remains in strong financial shape.

While the city projected it would bring in $63.4 million in revenue for the last fiscal year, the most recent estimates put the figure at $62.9 million.

However, according to assistant city manager Dan Paranick, reduced expenditures by the city more than made up for the shortfall.

"Even though we took in about $500,000 less than anticipated, we spent $2 million less," Paranick said. "We held the line at the end of the year on expenditures."

Using these bestguess figures—final numbers have not yet been calculated—the city's revenue profits for the past fiscal year will be approximately $800,000, proof that the city's budget is in good fiscal shape, Paranick said.

Although this is good news for the city, which had to bridge a $5-million gap in the general fund budget for fiscal year 200809, City Manager Mike Sedell described the overall health of the city's revenues with "cautious optimism."

This cautionary attitude is necessary because revenues for the next fiscal year are also projected to increase only slightly, Sedell said.

"I think that compared to most communities in suburban areas we are in very good financial condition," the city manager said. "The overall economy is certainly a challenge right now, and so we are monitoring revenues on an ongoing basis and adjusting expenditures to ensure (spending) that matches budget realities."

About 60 percent of city revenue comes from property taxes— which were negatively impacted this year by the poor housing market and the increased number of foreclosures—and from sales tax.

Paranick said the initial $500,000 shortfall was primarily due to a decrease in sales tax revenues from commercial areas outside the Simi Valley Town Center.

According to Sedell, Town Center is doing well compared to other malls, even though from fiscal year 2006-07 to 2007-08 growth was flat.

Although its sales tax revenues didn't increase substantially, the mall is holding strong in a tough economy and is faring better than other suburban retail centers that are down 10 to 15 percent, Sedell said.

He added that the city has plans in the works to "take the mall to the next level."

"Anything that improves the economic engine of this community benefits our residents, to the extent that the sales tax is a large driver of our ability to provide services," he said.

To boost economic development, the city is looking at adding retailers that aren't yet represented in the community in order to keep resident shoppers—and the tax dollars they generate—in Simi.

"We want to make sure people understand that whether they are buying a car or a new dress at Macy's, we want them to do it locally," Sedell said. "It makes a difference . . . and it helps our local businesses, the local people who live and work here."

In the past, development activity in the city had brought in a steady stream of revenue, but, as in the last two fiscal cycles, the city saw a decrease in developmentrelated fees in 200708 due to depressed economic conditions and the near-complete build-out in Simi Valley.

The city's development slowdown has brought building-related revenues down an estimated $4 million from two years ago, Paranick said.

In fiscal year 2005-06, the city banked $7.1 million in developers' fees. The figure dropped to $4.1 million in fiscal year 2006-07 and further declined to $3 million in 2007-08. A continued decline is expected for fiscal year 2008-09.

"Clearly we fell off a cliff, because there wasn't development going on when the economy stalled, when the housing market stalled," Sedell said. "And as such, even the reduced revenues we anticipated did not materialize."

Sedell said the city offset the anticipated lack of revenues by cutting back expenditures, eliminating budget funding for positions and instituting a hiring freeze.

Each city department closely monitored its budget to make sure the city ended the 2007-08 fiscal year in the black, he said.

And certain public works projects have been postponed until the economy picks up, Sedell said.

Making cutbacks that maximize revenues and at the same time maintaining a high level of services for the community is a balancing act, he added. After three consecutive years of tight budgets, he said, the city is taking steps to minimize future gaps in the general fund budget.

Almost a year ago, the city put in place a financial planning model that, based on certain assumptions, projects the city's revenues and expenditures for the next five years as well as any potential shortfall the city may experience during that economic cycle.

This evaluation process gives the city a strategic plan for where the city is going financially, Paranick said, so that it can better handle an economic slump like the one it is experiencing right now.

Sedell said he's confident the economy will turn around and that Simi will be prepared when it does.

"We're positioning ourselves for the future economically and strategically in terms of budgets and looking toward the next growth cycle, which will inevitably be here," he said. "And we'll be well-positioned for it."