Costa Mesa is going broke the old-fashioned way: It is spending more each year than it receives in revenue. The city's $50 million unreserved savings has dissipated in less than three years. Capital improvement funds have been reduced by more than 80%.
Costa Mesa faces a $9.5-million budgetary shortfall. All variable costs have been cut to the bone. Now it is time to make serious staffing decisions, like cutting salaries and pursuing more layoffs.
In fiscal 2007-08, the city, experiencing its highest revenue to date of $103 million, spent $82.7 million to compensate 611 staff members. Staffing consumed 80% of the operating budget and translated into an average cost of $135,352 per employee.
In fiscal 2010-11, revenues are down 20%, or roughly $20 million. Consequently, 113 employees, or roughly 18.5% of staff, have either taken early retirement or been laid off, with the vast majority retiring.
In 2010-11 Costa Mesa has budgeted revenue of $83 million and staff costs of $74.3 million for the remaining 498 staff members. Staff costs now represent 89.5% of the operating budget at an average cost of over $149,146 per employee.
It is difficult to fathom that during the worst economic decline in recent history, while the city initiated austerity plans and reductions in staffing, the cost per employee actually jumped by $13,844 each, which reflects more than a 10% increase.
The bottom line is not pretty. According to City Manager Allan Roeder, Costa Mesa's reserves have been reduced to a level that barely covers the city's self-insurance, equipment replacement, and the like.
In his budget message to the City Council, Roeder wrote: "Continued use of fund balance at this level is unsustainable."
In fact, Roeder has also confirmed that if conditions don't change, cash flow could become a problem within the next year.
