Though officials insist it’s too early to tell, new figures suggest more cuts are on the horizon at city hall.

A continued decline in revenue will likely lead to more cutbacks at mid-year in order to avoid a potentially significant budget shortfall.

At Monday’s City Council meeting, staff presented the council with the first quarter financial report for fiscal year 2009-10, which began in July. The numbers painted a somewhat grim picture.

The national economic downturn coupled with the ongoing state budget crisis and build-out at the local level has caused the city’s income stream to decline.

Revenues decreased by 0.9 percent in fiscal year 2007-08, by 5.8 percent in fiscal year 2008-09 and, based on current information, may decrease by as much as 10.7 percent this fiscal year.

`“Things continue to look tough on the budget front,” City Manager Mike Sedell said. “We believe we need to continue to hold the line (on expenses) very strongly, and as we get a clearer picture at mid-year . . . we will be bringing back some recommendations to get the budget into balance for this fiscal year.”

To combat the downward trend, Sedell said the city would be having discussions with its employee groups to seek additional ways to save money. The city will also be looking at possible program cuts.

General Fund revenues for the first quarter were $467,627, or 10.5 percent less than what had been predicted.

There was some good news. Total expenditures were $407,762, or 2.6 percent lower than the first quarter estimate. Personnel expenditures, in particular, were $127,845, or 1.2 percent below the first quarter estimate due to greater-than-expected savings in salaries and benefits from vacant positions.

Those savings, however, cannot make up for the fact that six of the city’s nine major revenue categories were below projected levels for the first quarter. This includes sales and property taxes, which make up 61 percent of the General Fund revenue budget.

Property tax receipts are about $350,000 below what the city expected. Sales tax data released by the state Board of Equalization for the most recent quarter was 15.6 percent lower than the same period last year.

Altogether, if the negative trend continues, city officials predict that sales and property taxes could come in under budget by $3 million next summer.

In addition, development-related revenues for the first quarter of this fiscal year were below the predicted amounts and could be as much as $400,000 under the budget by year end.

He said city staff will continue to monitor the General Fund over the coming months and the city will reduce expenses wherever possible. Further budget reductions will be presented to the council in February as part of the midyear financial report.

Prior to the economic slump, Simi Valley had experienced more than 10 consecutive years of General Fund revenue growth— growth that was fueled by annual increases in assessed valuation of properties, population increases, new development, the opening of a regional shopping center and a robust economy.

Councilman Glen Becerra said that when times were good, the city tried to “get ahead” by making sure its employees were well-paid and the needs of residents were met.

But now, times aren’t as good and the city must be “fiscally conservative” with citizens’ tax dollars even if the cuts aren’t painfree, he said.

“Times are tough and families are feeling it, businesses are feeling it and governments are feeling it,” Becerra said.

This includes the state government, which has decided to take $1.35 billion of tax revenue from redevelopment agencies in fiscal year 2009-10 in order to help resolve its own budget woes.

Sedell said about $6.3 million will be taken from the city of Simi Valley, funds the state isn’t planning to repay.

“That is a very large sum of money,” he said. “It’s not a loan, it’s a straight taking of money.”

The California Redevelopment Agency has filed suit to prevent the state from taking the funds from local governments. City staff is monitoring the issue and, in the event the state prevails in court, it will present to the City Council strategies to reduce the impact of the loss of funds.

Councilman Steve Sojka said he’s proud of the city and the council for reducing expenses while still providing residents with the essential city services.

“You are still seeing our city streets being paved because we are going out and getting stimulus money. You’re still seeing officers on the street,” he said. “These are tough times, but we’re still being proactive and planning ahead for the future. This city is still running pretty smoothly.”