Reso 2011-053 Attachment - Laserfiche WebLink

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ECONOMIC FACTORS AND NEXT YEAR'S BUDGET Like most cities in California, San Leandro continues to face an uncertain economic future. The financial turbulence in the global markets, the nationwide mortgage crisis and related regional housing downturn, as well as the State's on -going budget crisis have a direct impact on our local economy. City finances and the community services that depend on those resources have been strained as San Leandro deals with one of the nation's worst recessions in the last three decades. While there are some indications that the national economy is showing mild signs of recovery, the local economy, especially as it affects the municipal sector, is lagging. Unemployment remains high and many economists predict that it will take years before we see employment at pre -recession levels. The State of California continues to deal with a critical budget shortfall — currently projected at $24 billion for the next 18 months. Although the November 2010 passage of Proposition 22 provides increased protections for local revenues, State budget deficits of this magnitude will certainly have negative impacts to local economies and city budgets. Unfortunately, when and where remains a guessing game at best and introduces significant uncertainty to budgeting at the local level. Fiscal year 2009-10 clearly reflects the impacts of the economic turmoil which began in 2007. The City has sustained significant revenue losses and expenditure reductions. For example, sales tax revenues of nearly $17.6 million were $1.5 million less than the year before. Prior to the downturn in the economy, the City benefited from double digit percentage increases in property taxes. However, the 2009-10 actual revenues represent a reduction of 2% (568,000) in real property taxes and a reduction of $20% ($573,000) in property transfer tax revenue from fiscal year 2008-09. Overall, most key revenue categories experienced reductions from the prior year. The Fiscal year 2010-11 budget adopted by the City Council in June 2010 budget continues to focus on City Council priorities which are directed toward essential services, and maintaining a strong commitment to neighborhoods. Yet, in continued response to the poor economy and resultant revenue losses, the 2010-11 operating budget for the General Fund reflects significant expenditure reductions in staffing and programs. Over the last two years, the City has reduced its workforce by 20% (from 500 employees to 400 employees). With the bleak economic picture, the challenge to the City is to keep expenditures within available resources. Consequently, the City continues to actively monitor expenditures and revenues so that adjustments can be made. Projection updates, goal setting, performance reporting and mid -year evaluations are some of the essential tools and tasks that will help the City's weather the current economic downturn. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City's finances for all of its citizens, taxpayers, customers, investors and creditors. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of San Leandro, Finance Department, 835 East 14t" street, San Leandro, CA 94577. 16