Council to Hear Budget Update; Credit Rating Drops

The city’s general fund will likely be trimmed Tuesday night by $229,000, as recommended by San Juan Capistrano’s chief financial officer, Cindy Russell.

While revenues in the general fund—the main operating account for services such as public safety—are 16 percent higher than for the same period last year, they are lower than what Russell and other staffers in the finance department originally projected.

The City Council will make a decision about the budget during its 6 p.m. meeting in City Hall, 32400 Paseo Adelanto.

Overall, revenues received between July 1, 2010, and Jan. 31, 2011, were 46.6 percent of staffers' original budget projections. They should have been above 50 percent seven months into the fiscal year.

Last week, the upon learning that it has an $8-million deficit.

Fitch Ratings on Monday downgraded the city’s credit rating from AA to A, which it said “reflects a dramatic weakening of the city of San Juan Capistrano’s financial profile, including the depletion of unrestricted cash reserves, costly and delayed remediation of water contamination and insufficient revenues to meet annual debt service requirements.”

Fitch analysts said that while there will be limited operating and capital flexibility in the next several years, the city’s ability to make debt payments is projected to improve with already-approved water rate hikes, reduced operating expenses from decreased water purchases and over the leak of a gasoline additive into the city's water supply.

Russell’s proposal to reduce spending by $229,170 in the general fund equates to 1 percent of that account. The savings will come from freezing the vacated director of community services position, as well as a vacated inspector position in the development services department. There will also be a reduction to the public works budget.

Meanwhile, it’s proposed that the City Council approve a $75,000-increase in the legal services budget and an $85,000 increase for the city clerk to cover the cost of the

Russell is also proposing $7.2-million in cuts to the city's five-year capital improvement plan, a budget for long-term projects costing more than $50,000. Among those projects on the chopping block:

• Design of a recycled-water reservoir, as well as new pump stations and  pipelines, and system retrofits totaling $4 million.
• Reconstruction of two sewer trunk lines, as well as a sewer system monitoring project totaling $1.4 million.

On Monday, Fitch reported that San Juan needs to defer these projects because it  has no cash reserves available. It projects that surplus revenues will not be sufficient to make up the losses.  

"Projects will need to be deferred until cash reserves have been restored and/or debt will need to be issued to meet current five-year capital needs," its analysts said in a statement. "Issuance of additional debt will cause already high debt ratios to escalate further."

Also on Tuesday's agenda, the City Council will:

• Weigh in on a to rezone a .60-acre parcel along the west side of Avenida California so he may build a 25-foot-tall home. Residents in the nearby Pacifica San Juan community .
• Deny a claim filed by San Juan Capistrano resident Victor Cachia, who alleges the city owes him damages caused by the delay in approving the construction of an office building at 31551 Avenida Los Cerritos.
• Discuss hosting a memorial event for the 10th anniversary of 9/11.
• Talk about the mayor's .