STAGNANT REVENUES MAY FORCE CITY CUTS

It's been 20 years since Pueblo City Council was faced with the job of
cutting the city's work force in order to balance the budget, but that's
likely to happen this year as council tries to fashion a 2003 budget in the
face of slumping city revenues.

Council will accept a proposed budget on first reading Monday night that
calls for leaving 29 city jobs empty next year, including 10 jobs in the
police department.

A public hearing on the budget - and a final decision - will take place at
council's regular meeting on Nov. 25.

The phones have been ringing at City Hall to protest the cuts in the police
department.

City Manager Lee Evett has said the department will not reduce its patrol
or investigation divisions, so he intends to shrink the department by
ending the popular DARE anti-drug program (redirecting 4 officers back to
patrol) and pulling six officers out of the city's high schools. (Evett
wants the six officers who would still be in the middle schools to split
their time with the high schools next year.)

That's only part of the belt-tightening, however. Evett has drafted a
budget plan that cuts the personnel and operating expenses in each city
department by roughly 17 percent. In the Parks and Recreation Department,
that means leaving three jobs empty next year and cutting back city
recreation programs and park maintenance.

For softball players, the bad news is the city would offer only a summer
league next year, instead of fall, spring and summer leagues. There will be
similar cuts in the swimming program, meaning fewer classes for city kids
next summer.

The budget plan also cancels some big ticket items, such as $573,000 that
was earmarked for a new City-County Health Department, $280,000 toward
replacing the dilapidated Fire Station No. 4 in Bessemer and $195,000
toward extending William White Boulevard at the industrial park.

The list goes on: The city intends to cancel the program that allows police
officers to take patrol cars home with them, a step the administration says
would save $200,000. The purchase of two new fire trucks would be canceled,
as well as the purchase of 20 new police cars. Evett said those cuts are
not optional because city revenues are not keeping pace with city spending.
Last month, he recommended the city save an additional $1.2 million by
stopping its annual assistance to area nonprofit organizations, such as the
Boys & Girls Club and the Sangre de Cristo Arts and Conference Center.

A week ago, a majority of council told Evett to put that money back in next
year's budget.

Council is going to consider a list of fee increases and other measures
totaling $1.7 million next year that could pay for that continuing
assistance, but council has not made specific decisions about them.

The city's budget problem in simple terms is this: Evett is expecting city
revenues to total $61.8 million next year, but the city has budgeted $64.3
million in expenses.

A large part of the city's increase in expenses comes from higher personnel
costs. About two-thirds of the city budget goes to salaries and benefits
and council has already agreed to give city employees raises of 6 and 7
percent next year.

The budget includes a 7 percent raise for top management as well, but those
salaries are determined by the budget, not through bargaining. Councilman
Ted Lopez Jr. has already suggested council limit administration raises to
2 percent next year.

In addition to salary increases, the city is also facing nearly a 30
percent increase in health insurance costs.

The end result is that while all other city expenses are being frozen or
cut, personnel costs will go up by 8 percent next year, according to Bob
Hain, the city's director of fiscal operations. In simple terms, it costs
the city about $400,000 (including benefits) for each 1 percent in salary
it pays the city workforce. In contrast, 1 percent in sales tax revenue
translates into about $300,000 - according to Hain.

An unexpected expense this year was the city's decision to push for a
recreational water right on the Arkansas River - a move challenged by a
long list of other river users. The city has spent $430,000 on that effort
with about half of that coming from the city's sewer users fund.

On the revenue side of the ledger, the picture has worsened over the year.
Evett initially expected the city's revenue to grow by about 2 percent this
year, but the slump in the national and state economy undermined that.

Hain said he expects revenue this year to be about 1 percent less than in
2001. He points to the October sales tax report as the latest evidence that
the economy is slowing. Sales tax receipts that month were down nearly 6
percent when compared to October 2001.

The city got more bad news last week when it received an insurance actuary
report saying the city needed to put another $450,000 into a pension plan
next year (and another $450,000 in 2004) for its most senior police
officers who are members of its "old hire" pension plan. Evett said the
city will have to pay at least $350,000 next year and, as those veteran
officers retire, the city will pay an increasing share of the full $450,000
a year.

"That's $1 million over the next two years that we weren't expecting," said
Beth Vega, director of the city's human resources department.

When council was being lobbied by area nonprofit groups to protect their
funding, much of the attention focused on the city's reserves. How much was
there in the bank to help patch together a budget through hard times?

The answer from City Hall is the city has $1.9 million in an emergency
account required by the 1992 Taxpayer Bill of Rights. That money can be
spent in an emergency but must be completely repaid the next year.

The city also has $4.5 million in a cash-flow reserve, which is roughly the
amount it takes to operate city government for 30 days without any revenue.

Finally, there is $4.5 million the city appropriated last year for the
Arkansas River Legacy Project. The Army Corps of Engineers will refurbish
the river channel through the city, creating fish ladders and other channel
improvements, but it required city participation in the project, which now
includes plans for park areas along the river and a boating course.

The city committed $4.5 million in reserves to the Army, with the
understanding that $4 million would be repaid to the city from a variety of
sources over the next two years. Reimbursement would come from Great
Outdoors Colorado ($2 million), Colorado Department of Transportation
($300,000), Pueblo County ($400,000) and other partners. Of course, some of
those partners, such as the Pueblo Zoo, receive city support for their
general operating expenses.

The first reimbursement - totaling $620,000 - has already been included in
Evett's budget for next year, but not as a repayment of the reserve. It was
folded into the general fund and is budgeted to be spent.

Hain said the proposed budget council will consider will have only $500,000
in unappropriated reserves in it for next year, and that money will be
there only if council agrees to cancel its earlier commitment to provide
money for a new City-County Health Department, William White Boulevard
extension and an initial payment toward replacing Fire Station No. 4.