Now that the state has finally passed its budget, local officials are struggling to figure out what to do about the loss of income the city will suffer.

The Thousand Oaks budget passed by the City Council June 9 did not include what is now expected to be a $9.9-million loss of state revenues. City financial director John Adams said he's going to have to go back to see where the city can make additional cuts.

"The impact from the state is significant to the city, and at this point, staff will do the analysis and identify recommendations for the City Council to consider in September," Adams said.

He will bring his recommendations to the City Council when it returns from its August vacation.

The $9.9-million loss consists of $2.5 million in property tax that was targeted for the city's general fund and library fund and $7.4 million that belongs to the Redevelopment Agency.

When the city adopted the fiscal year 2009-10 budget, the council accepted the finance director's recommendations for service cuts to close a projected $6-million budget gap.

At the time, city leaders knew the numbers could change as a result of the state's finalizing a budget and other factors such as fluctuations in water rates, public safety costs, and sales and property tax revenue.

Water rates are expected to increase, and police costs charged to the city by the county are anticipated to rise by as much as 5 percent. Sales and property tax monies may continue to decline.

Another threat to the city's budget, CalPERS—the retirement account of city employees—costs won't be released until November. Due to the poor performance of the stock market, T.O. taxpayers could owe as much as $1.5 million to protect the retirement accounts.

In June, city leaders said they would dip into capital improvement reserves to lend the state money. At that time estimates were that the state might be looking to borrow about $2.4 million from Thousand Oaks.

The city has about $19 million in reserves, money built up over the past 40 years when revenues were higher than expenditures. Those reserves, left over from the recent budget, comply with city policy of retaining 20 percent of the budget in savings.

Reserves are used only for one-time expenditures, Adams said.

Public works director Mark Watkins said what happened in Sacramento this week could have been worse, and it almost was.

The state taking money from cities through the Highway User Tax Account was on the table until last weekend. The original state proposal was $1.8 billion, which would have meant $4.2 million more from the city over two years. Various cities threatened a lawsuit against the state on the grounds that the money "take-away" would have been unconstitutional, Adams said.

Litigation is expected on behalf of cities due to the unprecedented amount of the Redevelopment Agency funds to be seized from the state.