The city must make some tough financial decisions because it’s been spending more money than it’s taking in.

Challenges that city leaders must overcome in the 2009-10 budget include state budget cuts, declining sales tax revenue, flat property taxes, fewer developer fees, reduced investment earnings and fewer workers, which means cutbacks in public services, said finance director John Adams.

“Revenues are declining worse than we originally thought,” he said.

Thus far the city hasn’t replaced employees who’ve left, calling their former positions unfunded, but it hasn’t had layoffs.

That could change.

Staff will recommend department cuts to assure the city starts the next fiscal year, which begins July 1, with a balanced budget, Adams said.

The City Council made a $4-million revenue reduction to start the 2009 fiscal year with a balanced budget.

As it turned out, that wasn’t enough. After the $4-million adjustment, the total general fund expenditures of $70.4 million for fiscal year 2008-09 were still $3.4 million more than the $67 million in revenue.

“It’s very difficult, trying to project revenues in a declining environment,” said Adams. He’ll return to the City Council on Feb. 23 so elected officials can make more budget cuts.

Salaries and benefits have remained flat even though 275 city employees received a 3 percent raise in January. Positions that were frozen kept costs flat, Adams said.

In 2009, salaries and benefits hit $30.6 million, or 43 percent of the general fund budget.

Unfunded positions may not continue to stay on the books, Adams said.

When staff returns later this month, the council will look not only at unfunded positions but also at fewer positions, said Councilmember Andy Fox.

Law enforcement costs of $24.6 million, making up 35 percent of the general fund budget, remained about the same.

Capital programs in the general fund budget amount to $1.8 million, or 3 percent of the total. Some of those projects have been put on hold. Maintenance and operations in the general fund budget amount to $9.9 million, or 14 percent.

Currently the city’s reserves are at $14.3 million, with another $4.8 million in an emergency reserve fund. City law requires 15 percent general and 5 percent emergency reserves.

An $800,000 grant for California Lutheran University was taken from city reserves for a capital improvement project one-time expenditure.

The city library revenue was $8.4 million, with expenditures of $8.6 million.

The city’s water company, wastewater treatment plant, theater and golf course, all of which are supposed to be run as businesses with user fees, have their own concerns.

Even with the area being saturated with golf courses and fewer rounds being played, the municipal golf course on Moorpark Road still finished in the green with $5.6 million in revenue and $5.1 million in expenses.

Good theater management was credited for expenses exceeding revenues of $4.1 million by no more than $100,000, Adams said.

Although the city is paying more for fire protection than it is for the police, Fox said, that wasn’t made clear in the budget report because fire department costs weren’t included.

In a motion that passed 4-0 on Jan. 26, Fox included a direction for staff to include fire service expenditures so the council can see the cost of fire protection as it relates to the entire budget.

Conejo Recreation and Park District’s costs to the taxpayers were also included after a suggestion from Councilmember Dennis Gillette.

The council wants to know, Fox said, how much the city’s collecting and how much it’s spending on specific categories. The fire department wasn’t originally included in budget info because it’s not a city department. A portion of property taxes from city residents goes to the county for fire protection, Adams said.