By Todd R. Brown
The Argus, Fremont, Calif.

NEWARK, Calif. — The city of Newark will have to lay off workers, perhaps even police and firefighters, because of a "dire" budget outlook, officials said.

Next fiscal year alone, the deficit is projected to top $4 million.

"We're going to have a reduction in staff," City Manager John Becker told the City Council last week. "It's going to be painful. It is an absolute necessity that we do this."

Salaries make up 75 percent of expenditures, Assistant City Manager Dennis Jones said, and Newark must stop the bleeding now or face a deeper crisis in a year or two.

"It will continue to get worse before it gets better," he said.

Becker said Monday he will have a concrete idea of how many layoffs, furlough days and program cuts will be needed by the April 10 council meeting.

There are about 220 Newark employees, and each department must come up with 5 percent and 10 percent reduction plans. The city also may need to dip into gas tax funds.

There was a deficit from the start of the current two-year budget, according to a report presented Thursday:

-For fiscal 2006-07, the city predicted revenue of $38.6 million but expenditures of $39.5 million.

-For fiscal 2007-08, it predicted revenue of $40 million but expenditures of $41 million. Newark adopted the biennial budget in June 2006, making up the deficit with reserve funds.

-In March 2007, the city revised its estimate for the current fiscal year, putting revenue at $37.3 million

but expenditures at almost $40.2 million.

-An amended budget adopted in June 2007 balanced the current fiscal ledger by reducing expenditures to $39.1 million. That was done by whittling youth programs, freezing vacant positions and making other cuts totaling $1.1 million, then using $1.4 million in reserves to net a near $700,000 surplus.

At the time, officials said sales tax revenue had dropped in part because shopping centers at Pacific Commons in Fremont and Union Landing in Union City had lured away customers from NewPark Mall and other local retailers.

They also said auto dealers along Balentine Drive had been hurt by a nationwide fall in domestic car sales.

Yet the city apparently underestimated the revenue deterioration:

-In January the city again revised its fiscal year estimate, putting revenue at almost $36.8 million but expenditures at $39.9 million -- so the surplus flipped to a near $700,000 deficit.

On Thursday, the city said its upcoming two-year budget is streaked with more red ink, although revenue actually appears set to increase slightly.

-For fiscal 2008-09, the city predicts revenue of almost $37.1 million but expenditures of $41.4 million, netting a near $4.3 million deficit.

-For fiscal 2009-10, the city predicts revenue of $37.8 million but expenditures of $41.4 million, netting a near $3.6 million deficit.

Mayor David Smith said last week that "this is probably the bleakest thing I've seen" in three decades at his post, including layoffs that occurred in fiscal 1991-92 during the national recession.

Despite cost-cutting in the past few years -- including a hiring freeze that has left 15 city jobs vacant -- Becker said more slashing must be done. He said property taxes also are down because of foreclosures and property reassessments and noted that the city hasn't seen a surplus since 2004.

Still, he said he expects a small but steady increase in revenue through 2012, so better days are ahead.

"There is hope," Becker said, while cautioning that for now, "things are dire."

Copyright 2008 The Argus