BY MARK SCHUMANN

City Manager Jim O’Connor has instructed department heads to prepare for budget cuts of as much as 14.9 percent beginning October 1.

In a May 15 memo, O’Connor asked for two proposed budgets for the next fiscal year, one with a 10.9 percent reduction, and a second trimming an additional 4 percent, for total cuts of 14.9 percent. O’Connor explained that because he is not being required to make an across the board cut of 10.9 percent, he needs to know where deeper cuts can be made in order to allow for shallow cuts in other areas.  “At the end of the day we need to know how we will make budget cuts totaling $2.2 million,” he said.

“You need to think about this in terms that next year your money allocation will be reduced by these amounts and you will need to scale back or contract out the activities of your department,” O’Connor wrote.

According to O’Connor’s memo, department heads are to assume the budget cuts will go into effect October 1, the first day of the 2013-2014 fiscal year.

O’Connor and his staff are scheduled to discuss the city’s budget challenges next Tuesday.

O’Connor’s memo was written the day after he and Finance Director Cindy Lawson met with the City Council in a special called workshop, which was held to consider how to close a looming $2.2 million budget gap expected to result from the sale of the city’s electric system to Florida Power & Light.

By turning over Vero Electric, the city will lose some $7 million that has been transferred each year to the general fund to help pay for administration and to subsides city services, such as parks and recreation, lifeguards and police protection.   In addition, the annual transfers from the electric fund have helped keep Vero Beach’s taxes among the lowest in the state.

Not all $7 million will have to be made up in spending cuts, though. Rental income from the power plant, receipts from a new 6 percent franchise fee to be paid by the 12,000 electric customers within the city, taxes to be paid by FPL, and expected savings from restructuring the city’s pension plan will all help to close the budget gap to $2.2 million.

In advance of the March 12 referendum, opponents of the sale of the electric system cautioned it would result in steep cuts in city services, even in the police department.  Some in local press, along with a political action committee to which FPL contributed nearly $100,000, dismissed those warnings as “shameful.”  According to O’Connor, though, the budget cuts will be deep and will reach into the police department.

Providing municipal services is labor intensive, O’Connor explained, which is why 80 percent of the city’s budget goes to salaries and benefits.  O’Connor said it will be impossible to make anywhere near the level of spending cuts necessary without further reducing the city’s work force, which has already been pared down 20 percent from where it peaked seven years ago.  According to O’Connor, along with the layoffs will come the reduction or elimination of some services.

Currently the city has 203 employees in general fund departments, such as administration, public works and the police department.  O’Connor said that even without the further budget cuts needed to balance the general fund, seven employees are to be laid off as a result of the sale of the electric system.

But the savings from those seven layoffs will only begin to close the looming $2.2 budget gap.  Based on an average salary and benefits of $60,000, making the cuts the Council is requesting will require laying off and additional 30 or more employees.  In reality tough, unless some higher paid upper-level managers are laid off, the number of city works to receive pink slips will have to exceed 30 in order to make the targeted budget cuts.