Declining revenue is again forcing elected officials to make tough decisions concerning the city budget.

On Monday, the City Council will finalize its spending plan for the next fiscal year, but not before deciding how to bridge an estimated $4.3-million deficit.

With cuts to jobs and programs looming, the mood at city hall is somber.

“It gets more challenging every year,” Assistant City Manager Laura Behjan said. “But we’re up to it.”

This week, the Simi Valley Acorn sat down with City Manager Mike Sedell and his budget team to talk about the challenges the council will face and strategies for closing the gap.

According to the city’s most recent figures, revenues for next fiscal year are estimated to be about $54.8 million—down from $57.2 million last year—while expenditures are expected to be about $59.1 million, compared to $55.5 million last year.

A reduction in sales and property taxes, the city’s top revenue sources, as well as a significant drop in development fees are the cause of the city’s problems, Dep. City Manager Frank Catania said.

In the past, the city brought in significant revenue from developers building large projects. Income created by homeowners or businesses making improvements merely supplemented that, Sedell said.

But development in Simi Valley all but came to a halt these past few years because the city is at near build-out and the housing market “has fallen off a cliff,” Sedell said.

In fact, this year the city issued permits for just two single-family dwellings, Catania said.

At the same time that revenues are decreasing, costs are increasing, particularly on the landscaping front. The city’s landscape maintenance contracts, budgeted at $1.2 million, represent the largest contract cost to the general fund—falling under the services category, which accounts for 7.2 percent of general fund expenditures—especially since the price of water has gone up.

Sedell said the biggest challenge for the council will be working through this imbalance, and that means making cuts, including eliminating personnel positions.

As part of the budgeting process, each city department provides a list of reverse priorities, or potential cutbacks, equal to 10 percent of its budget.

As it stands, there are 32 filled and 15 vacant positions listed for elimination, and 19 of those filled positions are in the police department. This includes six officers in the special enforcement section, five motor officers, two school resource officers, two police officers, two sergeants and one lieutenant.

But Sedell said he didn’t think the council would be inclined to take any officers off the streets.

“The council, without question, sees public safety as the No. 1 priority,” he said. “I don’t anticipate the council will look kindly on the taking of any sworn positions at the operational level.”

Over the past two to three years, the city has eliminated more than 70 positions at city hall through attrition, freezing positions or layoffs.

Despite the jobs at risk, Sedell said, right-sizing the organization doesn’t just mean downsizing.

And there are other ways to bridge the $4.3-million gap, including offering retirement incentives, shifting employees to where they are most needed and moving positions into other fund categories.

Mayor Paul Miller said he feels “pretty positive” about not having to cut any jobs this time around.

“We might have to move some people around but I see us hopefully not letting anybody go,” he said. “That would be my goal.”

Miller said making budget decisions that result in a reduction in services is the toughest part of the council’s job. But he is optimistic that it will be better this year than last.

And though this will be his final time balancing the budget, he said that makes no difference in the outcome.

“The decisions that have to be made are going to have a lasting effect on the city and regardless of if I am there or not the decisions have to be made and they have to be good ones,” he said. “I think the City Council pretty much understands what the needs of the city are and I think the council has continued to make good decisions when it comes to the budget.”

The city manager wouldn’t reveal what his recommendations to the council on Monday would be, but he did say that not every reverse priority would be acted upon.

“We have to be very careful and strategic in looking at what positions are further reduced, because you have to look at the service provided and say do we have enough people to continue to provide the service at the level our citizens expect and have a right to,” Sedell said.

“We’re at a point where the elimination of any of these positions would have an impact on service levels,” he added.

Sedell said that by the time the council meets, he should have a better estimate of actual revenues received this year as well as a clearer picture of the status of negotiations with two of the city’s three employee unions.

Heads of the general unit and management groups are meeting with the city to work out salary and benefits for the coming year.

In addition to balancing the budget, the council Monday will also consider creating a strategic plan aimed at maintaining the city’s “fiscally conservative” reputation.

Looking into the future, the city’s budget staff says a “structural shortfall” will exist in the general fund. This is a result of several factors, including the down economy and the city’s past use of one-time non-General Fund resources and surpluses to balance budgets.

A staff report said long-term actions must be taken to maintain sufficient cash reserves while still providing quality services without the need for the city to bring in significantly more revenues.