SHOP DROP—Gina Virzi, co-owner of All Pro Bicycles, assists customer Mark Medina on Wednesday. A report released by the city last week shows sales were off 15 percent in Simi during the second quarter of ’09 when compared to ’08. The high spirits at city hall after the celebration of Simi Valley’s 40th birthday were fleeting, due to some disappointing economic news.

A report released last week by the city’s property and sales tax consultant shows that sales tax revenues in 2009 have declined even more than officials had anticipated.

The data covers tax revenues received from local sales made from April through June 2009. Numbers for that quarter reveal that sales in Simi were down 15.6 percent from the same period a year ago.

Countywide and statewide sales tax losses were 17.9 percent and 21.2 percent, respectively.

If the trend reflected by the latest data continues, the city could experience an unexpected revenue shortfall of $2.3 million in its projected $13.7-million sales tax revenue budget, according to the report.

Still, City Manager Mike Sedell said there’s some reason for optimism.

“What we’ve heard in the community is that sales have been doing a little bit better or at least leveled off . . .” Sedell said. “All of the economists are saying now that the recession has ended, but they have all said that the recovery will be very slow.”

The city manager said he has faith that the revenues will start to pick up and become stable and that if there is a shortfall it won’t be as large as $2.3 million.

However, he said that until he sees evidence of that, it would be imprudent to predict.

“We’re hopeful that the economy is turning . . . but we can’t rely on it,” he said, adding later, “It’s still too early in the (fiscal) year to see what the real trend will end up being.”

Simi businesses took big hits from April to June.

The city experienced a decline in sales of new motor vehicles, home furnishings, lumber and building materials, and electronics and appliances. The drop in fuel prices also reduced service station receipts.

According to the consultant’s report, sales tax revenues from service stations were down 37.8 percent; department stores were down 35.8 percent; new auto dealers were down 32.6 percent; home furnishings were down 26.4 percent, and restaurants that sell liquor were down 19.1 percent.

The report shows contractors being up 374.4 percent. However, the numbers are misleading, Sedell said, due to a state adjustment from the previous year. When this aberration is factored out, the sales tax generated by contractors is actually down 28.3 percent from the same time last year, putting it more in line with the other business categories.

If the downward trend continues and the city does find itself in a worst-case-scenario situation, it would have to look at making midyear cuts, Sedell said. The city would also work with its employee groups to see if additional savings could be found in other areas.

An effort would be made to avoid cuts to front-line services, he said.

While most economists agree that the national recession ended around the end of July, the restoration of the state’s sales taxes will lag, the report said. And it may take even longer for the cities, Sedell said, since they received receipts three months after the state.

The Cash for Clunkers program stimulated new car sales this past summer but largely borrowed from the next two quarters’ sales. Significant recovery is not expected until the 2011 models arrive, and RV, boat and motorcycle sales may languish until the return of full employment.

Though the stimulus package boosted building and construction, benefits from that will be offset by state cutbacks. A modest recovery in this area is not expected until after next summer, the report said.

Plus, retailers are planning lean inventories for the holiday season, which is projected to be flat with only modest gains through 2010.

Sedell said that while the city evaluates its sales tax revenues on a quarterly basis, staff is constantly monitoring all the income categories and expenditures in the budget.

He said it’s important for residents to be aware of the city’s financial well-being, as it is local revenue that enables the city to provide the services the public expects.

Sedell hopes the community will heed the message to Shop Simi Valley First.

“A strong local economy is a strong local government resource base,” he said.

The latest economic report, compiled by The HdL Companies, can be viewed on the city’s website at www.simivalley.org.