Irvine’s Budget Outlook for 2010; Reserves are Healthy

Irvine Mayor Sukhee Kang, fresh of his listing as one of OC Metro’s “Orange County’s 25 Hottest People,” issued a report on the City of Irvine’s budget outlook for 2010.  While revenues are down, strict cost cutting and smaller government have resulted in a healthly rainy day fund — all without cuts to services city residents have come to expect.

The Mayor’s report is listed below. At a time when so many Orange County cities are hurting financially and cutting back, it’s nice to see Irvine’s progressive leadership continues demonstrate quality government with all the compassion that lacks from conservative proposals to cut services to those who need help the most.

From Mayor Kang:

Over the past year we have seen the national economy decline to unprecedented levels. Across the country and in California we are seeing fire stations closed, streetlights shut off, library services, cancelled, and swimming pools and recreation centers closed. Our responsibility as your elected leaders during this economic downturn is to ensure that our government is fiscally sound and that it continues to provide the services that keep you safe and make Irvine a great place to life and work. While all state and local governments are having to cut back to live within their means, we are fortunate that our foresight and prudent fiscal planning has put us in a better financial position that many of our more unfortunate neighbors.

Last fiscal year (2008/9) we developed a “Bridge Plan” to see us through the recession by strategically using our “rainy day reserves,” coupled with strategic expenditure reductions.

Our “Bridge Plan” was indeed successful due largely due to the efforts of the City Council and City Manager to effectively manage the general fund and here’s how: 

  • We awknowledged that we could not rely on reserves alone.
  • Our revenues dropped 7% from the previous year, and were 9.5% under budget. We had to make up almost $15 million in lost tax revenues. 
  • While this came as a blow to our budget, we were able to make up more than $9 million of it through cost containment, with the balance coming from completed or delayed capital projects.
  • The original “Bridge Plan” called for the use of $17.6 million in reserves to balance the current 2009/10 budget.
  • Through prudent cost controls and resource maximization, we were able to reduce the use of reserves to $13.2 million, thereby increasing the reserves available for future years by $4.4 million.
  • Not only did we end the year without additional use of reserves, we actually had a surplus.
  • In fact, in spite of a loss in revenue, the City’s contigency reserve fund has an ending balance of $21.8 million.

Since 2008 there has been some positive economic news and many economist believe that we have hit the bottom of the recession. While this may be true, the government sector recovers more slowly that the general economy. That is why we can expect our Strategic Business Plan, which we will see in January, to forecast imbalances that require rainy day funds and more cost reductions over the next couple of years.