The city has published its 2008 year-end financial report, which summarizes the steep level of revenue declines seen last year.

Those shortfalls led to several cost-cutting measures and organizational restructuring at the city, including layoffs and the delay of major capital projects.

“There are no surprises in these statements for us,” City Finance Director Elray Konkel said. “The community needs to understand it was a challenging year financially.”

Overall, the city ended 2008 with a negative general fund balance of $211,000.

The city also closed 2008 with negative fund balances in the street fund ($173,000), Building and Development Services fund ($383,064) and a deficit in the Storm and Wastewater Management fund.

“We’re not trying to make light of negative fund balances,” Konkel said. “It shows poor performance.”

The report notes that government revenues were beginning to show signs of slowing in the fourth quarter of 2007 and that the larger economic recession had begun to affect the city by April 2008.

Overall, tax-supported general fund revenues in 2008 were 7 percent under budget. Street fund revenues were 21 percent under budget.

A large portion of revenue declines were attributed to a bottoming out of the real estate and development industry. Building and Development revenues were down 42 percent in 2008 and required operating subsidies from the general fund to pay for the cost of processing building permits. Real Estate Excise Tax fund revenues, a tax on the sale and transfer of property, were 46 percent under budget.

The utilities were also impacted by the decline in real estate action. Revenues in the city’s Consolidated Waterworks Utility were 5.6 percent under budget, largely due to decreases in connection fees.

The report also notes that “continuing increases in the future rates for the utilities, specifically sewer for major capital projects and SSWM for regulatory issues, will be necessary to sustain those funds.”

Although revenue was beginning to make significant downturns in mid-2008, Konkel noted it took awhile for the city and City Council to react.

“Even though we’re a small city, it’s difficult to slow down the process in a matter of a few months,” Konkel said. “Yes, we ended the year poorly and we believe we recognized that by mid-January (2009), and we made significant changes by mid-February.”

The revenue downturn continued during the first quarter of 2009, necessitating the council and city to reduce projected governmental revenue by roughly $2.8 million.

The city also laid-off 14 full-time positions, implemented a 10-day work furlough program, reduced work hours for nine staff members and didn’t fill vacant positions. Professional services contracts to island human service and arts and humanities nonprofits were also slashed. The city and council are still considering the sale of surplus properties to achieve year-end estimates for 2009.

A list of eight properties that could potentially be surplused will be released later this month. The city is hoping to make at least $850,000 from those surplus land sales.

By the end of April 2009 the city financial projections had begun to stabilize and match projected incomes and expenditures that were reevaluated in the beginning of 2009. The city’s cash flow is now being monitored on a weekly basis, with cash flow reports being issued monthly.

Konkel noted that through council and administrative action, budgeted operating expenses for 2009 are roughly $4 million less than they were in 2008.

Still, the city is not out of the woods in terms of financial troubles: “It is expected that there will be revenue challenges through the years 2009 and into 2010,” the report states.

“The council has been operating with this awareness for months now, I consider this report to not raise new issues for us, but it serves to remind us we didn’t escape the terrible economic decline that was witnessed across the nation,” council member Barry Peters said.

The full report will be discussed at the council’s Finance and Personnel Committee, beginning 3 p.m. Tuesday in City Hall.