Fueled by the increasing costs of employee labor contracts and the uncertainty about the future of oil revenue, Long Beach projects it will have a nearly $30 million budget shortfall for the fiscal year starting in October, city officials said Tuesday.
Long Beach City Council members got a preliminary look at what next year’s budget could hold during a special study session that showed the projected shortfall had grown from $17.5 million to $28.4 million. Another update is expected in March.
“It is unlikely that the future shortfalls of this magnitude will resolve on its own without intervention,” said Geraldine Alejo, the city’s acting budget manager.
The new projections take into consideration the effect of new contracts with employee unions that include raises, and they account for the potential loss of oil revenue, which could be triggered by a ballot measure in November.
Voters are being asked whether to repeal or approve a law, Senate Bill 1137, that instituted 3,200-foot buffer zones between oil operations and sensitive areas like houses, schools and hospitals. If the law survives, the city estimates it could cost Long Beach about $20 million annually through 2030.
Closing Long Beach’s budget gap, something that’s required by law, could require cuts to services or layoffs if the city can’t grow its economy or find new revenue, Alejo said.
Alejo provided examples of just how deep cuts would have to be to cover a deficit as large as the one that’s expected. Closing three libraries, for instance, would save $3.6 million; stopping all tree trimming would save $5.1 million; and doing away with all park maintenance would save $11.9 million.
Alejo said it’s unclear whether several new businesses relocating to and opening in Long Beach could help reduce the deficit. Mayor Rex Richardson made a handful of announcements about new businesses during last week’s State of the City address, including the addition of JetZero, an aviation company that plans to add 500 jobs.
Richardson also said that the city would build a temporary amphitheater near the Queen Mary, something he hopes will help bring in tourism and tax dollars. It’s planned to open in 2025.
On Tuesday, Richarson said he hopes to limit any cuts the city might have to make.
“I don’t want to be in a place where we need to close libraries,” Richardson said, noting how long it took to restore cuts that were made in North Long Beach before he served as a council member there.
Richardson said his goal this year is to maintain services, but the city will have to “manage expectations” because there won’t be millions in funding to pay for community programs as there have been in past years.
There is the possibility that Long Beach could use leftover COVID-19 relief funds to plug the upcoming deficit, but the city is still projecting $43 million in cumulative shortfalls through 2030. With the majority of the city’s expenses sunk in employee salaries, the economic issue is structural and likely won’t be solved with one-time infusions of cash.
At this point, the budget is still a moving target. In recent years, the city’s initial projections about large deficits have shrunk as the city’s economy continues to outperform expectations as it recovers from COVID-19. The figure could change in March and again in 2025 depending on how actual tax revenue performs.
Long Beach will begin a series of community meetings Wednesday night where community members can provide early input on what city services should be prioritized. The first meeting is scheduled for 6 p.m. at the Museum of Latin American Art in Downtown.
Editors note: This story originally said JetZero planned to add 200 jobs. It plans to double its workforce to 200 this year but add 500 jobs overall.