The City of Arvin, facing a budget deficit of an unanticipated scale and lacking the resources to patch the hole, is experiencing a fiscal emergency.
The farming burg south of Bakersfield could see a general fund deficit of $1.8 million or higher, city officials said. No reserve funds are currently available to help the city get out of its financial hole, so the city is looking at cuts and other means to lower the deficit.
“We need to take the necessary steps now to make the budget balanced. The longer we wait, the worse it will be,” Mayor Jose Gurrola said. “We have to make sure the budget revisions that we make are going to be sustainable and ongoing, fiscal year after fiscal year. We don’t want this to happen again.”
In its budget for the 2017-18 fiscal year, the city estimated it would receive $7.7 million in revenue but overstated revenues by about 20 percent at $1.5 million, according to a revised budget presented to the Arvin City Council earlier this month.
The city said it expected about $350,000 more in revenue from development fees. It had also accidentally double-counted some transportation-related revenues.
“Over a number of years, accounting practices that weren’t modern practices led to some of these errors to occur,” City Manager Alfonso Noyola said. “The lesson out of this is that we need to be more modern so we can alleviate these kinds of accounting mistakes, which can occur very easily.”
The city has had budget deficits for the past few fiscal years, according to the revised 2017-18 budget, and they seem to be getting bigger each year.
Gurrola said the city wasn’t aware of a deficit until it received the audit results for the 2015-16 fiscal year this August, which showed a deficit of around $900,000. Although the 2016-17 audit hasn’t been completed yet, Gurrola said it is expected to have a deficit of around $1 million.
The city thought it had about $1.2 million in reserve funds it could use to reduce the deficit, but Noyola said the city found out that money is unavailable because it consists of loans that have yet to be repaid.
“We recognized that what comprised our reserves is money that is restricted,” Noyola said. “The bulk of our reserve is IOUs. The loan money’s not coming in.”
To help alleviate this year’s deficit, the city is seeking to make $628,000 in cuts. Some of the cuts that have been discussed include eliminating six staff positions, reducing travel expenses, cutting overtime and training, and halting the funding for some capital projects.
The city also wants to apply a $100,000 economic development donation toward the deficit, according to the revised budget.
In addition, the City Council could approve a one-time $1 million transfer from the sanitation fund, repayment for when general fund money was used to cover costs associated with litigation.
“You can never fix problems just by cutting. It has to be a combination of cuts and revenue enhancements,” Noyola said. “This [transfer] is basically a band aid so we don’t have to cut as deeply as we would otherwise need to right now.”
While the proposed changes would help with the current deficit, the city could still face a deficit next year of up to $1.2 million if additional fixes aren’t made.
“We’re just starting the process in talking about strategies for 2018-19,” Noyola said. “We will consider anything available to us to attack the structural deficit that will occur.
Noyola said the city will have a plan in place by July 1, when the new fiscal year will begin.
Outside of cuts, Noyola said the city is also talking about ways to increase revenues in its battle to reduce the deficit over the next few years. One of the options on the table is a tax increase. Noyola said the city is also looking into charging for development services and other services that it has been giving for free.
“We need long-term solutions that will allow us to stabilize and start increasing and enhancing services to the community,” he said. “We want to be able to provide services as best we can with the resources we have.”
Noyola said the city is also looking to pass an ordinance soon that would allow indoor cultivation of commercial and medical marijuana within city limits, which he said could bring in some revenue within the next year or so.
The Planning Commission will hold a public hearing on the matter at its Oct. 30 meeting.
Gurrola said he’s optimistic that the city will be able to pull through in its fiscal crisis.
“I’m frustrated that we’re in this position, but I think the city will be stronger in the end because of it,” he said. “We’re all trying to get through this together. I think the community has trust in us to get through this.”
The Arvin City Council is set to take action on the proposed budget cuts and adjustments during its Nov. 7 meeting.