CITY KEEPS RESERVES THIN SPENDING PLAN LEAVES LITTLE ROOM FOR ERROR.

Byline: Heather MacDonald Staff Writer

SANTA CLARITA - The city's ambitious capital improvement program, focused mainly on roads and parks, has depleted Santa Clarita's reserves, threatening officials' ability to meet unforeseen costs, according to a budget analysis by the Daily News.

After the city collects all of its revenues, pays all of its bills and funds its reserves this year, only $106,000 will be left over, according to the city's budget adopted in June.

``That's the city's margin of error,'' said Director of Administrative Services Steve Stark said. ``We'd like it to be larger.''

In 2000, the city had $2.3 million left over, budget records show.

``We're certainly a little leaner than would be our standard,'' Stark said.

Since 1998, the city's budgets have been shaped by the booming economy and ever-present growth, which have increased both revenues and expenditures.

The city's reserve accounts are also dwindling, records show. When they approved the budget, the City Council set aside $7.5 million to handle emergencies and unanticipated expenses. That is $4.5 million less than the year before, and $5.5 million less than 1999.

``The good news is that all these projects have been completed or are under way,'' Stark said. ``The bad news is that this year, we don't have any flexibility.''

Mayor Laurene Weste has spearheaded the push to buy undeveloped land throughout the city and turn it into playgrounds and ball fields. She did not return telephone calls Friday.

``She's never met a park she didn't like,'' said Councilwoman Jo Anne Darcy. ``And this community needs parks.''

City officials have accelerated the work on Central Park, quickly adding four baseball fields to the just-completed first phase of work. They've also taken on several new neighborhood play areas, like Pamplico Park in Saugus and Oak Springs Park in Canyon Country. Maintenance and staffing costs for those parks along with the Sports Complex have drained the city's coffers, records show.

Before approving this year's budget, council members delayed several infrastructure rehabilitation programs and dipped into the City Council's contingency fund to set aside $1.5 million in an open space reserve fund.

That reserve is expected to be used to purchase 38 acres next to the city's Sports Complex and planned Aquatics Center.

Last year, city officials spent $1 million to purchase Whitney Canyon, an area outside the city - and $200,000 this year to maintain the wild land.

Also straining the city's budget is the emphasis on Golden Valley Road. Once it links to Newhall Ranch Road, the $200 million route will link the Antelope Valley (14) Freeway and the Golden State (5) Freeway.

Earlier this month, the city loaned $2 million to the William S. Hart Union High School District. The money will be used to pay for the first phase of Golden Valley Road, which the city and the school district are sharing. The funds will come out of the city's $4.4 million public facilities replacement reserve.

``The reduced reserves reduce the city's flexibility and ability to respond and deal with the unknown,'' Stark said. ``Any number of things could happen over the next year that we wouldn't have the funds to deal with.''

The City Council has also funded several cultural arts projects in Santa Clarita, promising the College of the Canyons $2.4 million over three years for a new performing arts center while funding the Canyon Theater Guild's move from a dusty stretch of Sierra Highway to downtown Newhall.

Council warned

Each time the City Council met to hammer out this year's budget, City Manager George Caravalho pleaded with the council to finish one project before starting another. He warned that the economic slowdown could seriously impact future years' budgets.

``We need to decide what business we're in,'' Caravalho said. ``We seem to be chasing rabbits.''

While the council members acknowledged Caravalho's concerns, they pushed ahead with the plans that have depleted the city's reserves.

The first account council members tap in times of need is the contingency fund. While city officials have never spent more than $500,000 out of that $1.5 million fund in one year, it is being spent quickly this year on a number of pressing issues.

``The council often uses the contingency fund, sometimes several times over the year,'' Stark said. ``That's what it is there for.''

Since the adoption of the budget, which reduced the fund to $1 million to fund potential open space purchases, the City Council has spent $45,000 to fund a winter homeless shelter and another $25,000 on an energy consultant and advisory committee to cope with the waning energy crisis. They are expected to add $10,000 to the committee's budget from the contingency fund at their next regular meeting Aug. 28, said city spokesman Jason Smisko.

Officials will also pay for the audit of the city's trash haulers and contracts out of that fund. That could cost as much as $500,000, according to estimates complied by Councilman Cameron Smyth.

Mine fight costs

The fight against Transit Mixed Concrete's planned Soledad Canyon mine is another pressure on the budget. Deputy City Manager Rick Putnam said he expects to ask the council to dip into the contingency fund before the end of the year. About $1.5 million has already been spent in the effort to kill or scale down the mine.

The dwindling reserves are particularly troubling because of actions by the owners of the former Bermite explosives factory. Last week, they terminated Santa Clarita's lease of the Metrolink Station on Soledad Canyon Road and stopped the city's construction of Golden Valley Road, a crucial route.

To keep the train station open, city officials may be forced to purchase it from Remediation Financial Inc., the property's owner, for $3.5 million. City officials did not set aside any money for the expense in this year's budget. A lease could cost the city $60,000 a month - up from the $1-a-month that the city had been paying.

RFI has vowed to sue the city unless it is allowed to develop the property in phases as each portion is certified by clean by state officials. The cost of that litigation could be substantial and exceed the city's current legal services budget, said City Attorney Carl Newton.

The California League of Cities does not recommend that its member cities maintain a certain level of reserves, said Frances Medema, a policy analyst.

``There just isn't one-size-fits-all,'' Medema said. ``It depends on local situation, and where the city gets its revenue from.''

A survey last year found that most cities kept anywhere from 7.5 percent to 30 percent of their budget squirreled away.

``Cities should set a prudent reserve policy,'' Medema said. ``Beyond that, its a judgment call.''

But even with all of the projects that have been completed and started over the last year, many needs remain unmet. Other projects are unfinished, waiting for cash infusions. City officials need another $4 million to finish the planned Aquatics Center, $3 million for a new community center and $3 million for road maintenance.

BUDGET SHORTFALL

Santa Clarita's budget is the tighest it has ever been in the city's 13-year history. Reserve funds are drying up, and city officials have no room for error.

Year Fund Balance Reserve Accounts Total

1998 $2.89 $6.5 $9.4

1999 $4.5 $8.5 $13

2000 $2.3 $9.8 $12.1

2001 $106,000 $7.4 $7.5

(in millions of dollars)

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BUDGET SHORTFALL (see text)

Source: City of Santa Clarita