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Lincoln not heading for bankruptcy

By: Stephanie Dumm, News Messenger Reporter
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Although the city’s budget appears bleak, the city of Lincoln will not go bankrupt. That’s according to City Manager Jim Estep, who said Monday that “bankruptcy is not something we’re even considering at this point.” The city is facing a $1.7 million deficit in the city’s General Fund, according to information given during the mid-year budget review at the Feb. 23 City Council meeting. Aside from the general fund, “everything else in the city runs like normal,” Estep said. “Our issues are related to the economy falling apart,” Estep said. “We were just on the verge of bringing in retail which would have brought in more sales, significantly more, (which) never materialized because development stopped.” Estep said the sales tax is down because the retail commerce didn’t develop and the city “now has property tax declining.” Sales tax and property tax primarily fund the city’s General Fund. Estep said the city has “enough reserves to get us through 18 to 24 months” but “the issue will come about when we get to that point” of using the reserves. After the reserves are used up, Estep said the “next step would be further cuts in services.” “The ones that would really start to hurt,” Estep added. “Basically, we would provide public safety and anything else would be considered nice to have, but not a need to have.” He said the city asked residents to complete the Community Feedback Survey “to know what are the most important services” to residents. The survey asks residents to rank items, such as “maintaining financial viability of the city,” “maintaining library services” and “restoring police officers.” “Most say financial solvency is No. 1 and, after that, public safety,” Estep said. “We are trying to figure out what is most important (after financial solvency and public safety.)” Barbara Flowers, who was walking around downtown Lincoln Tuesday morning said that the city’s financial situation will affect all Lincoln residents. She “so far” is not worried about the city’s finances since she is retired. Flowers said the potential budget cuts are “really sad because I have a grandson who uses the library.” The city has three ways to solve the city’s current financial situation, according to Estep, which are to use the city’s reserves, decrease the city’s spending and increase the city’s revenue. “We are looking at doing all three, and use as little of the reserves as possible,” Estep said. “We will obviously cut expenses where we can and are looking at concessions again.” The concessions include salary reductions for city employees, including police and fire. Estep said the city does not “have a lot of control” over bringing in more revenue but could put a revenue measure in place, including a Utility Users’ Tax. “If it appears there is not other alternative than drastic cuts, they (City Council) may decide to put that on the ballot,” Estep said. “The Utility Users’ Tax is most likely and the fairest because (residents) have some control over the use of utilities.” Estep said the percentage the utility bills would be taxed would be “the most minimum possible” to cover the services determined by the public to be most important. He said the tax could be between 3 to 7 percent. Is Lincoln facing bankruptcy? The city of Vallejo filed for bankruptcy in May of 2008 and The News Messenger asked Estep if Lincoln could be another Vallejo. “No, Vallejo went bankrupt for totally different reasons,” Estep said. He cited their bankruptcy to Vallejo’s “generous labor agreements.” The News Messenger talked to JoAnn West, the public information officer for Vallejo’s bankruptcy, about how Vallejo coped with filing for bankruptcy and how the city is doing now. “It has been a difficult process but it was a necessity due to the fact that the city’s expenses were outpacing the city’s revenue,” West said. “The primary expenses came from labor costs so the city tried to renegotiate contracts with the labor unions.” It has been difficult because of the “serious reductions of personnel,” according to West, which “results in a reduction of services.” When asked how the residents of Vallejo have reacted to the bankruptcy, West said, “The majority of citizens don’t notice a difference of pre- and post-bankruptcy unless they have regular contact with City Hall.” “Probably the most visible different is the reduction in the police department and fire department because of severe cuts in both departments,” West said. “The majority of citizens are aware (of the reductions) and have been impacted by them.”