The Vallejo, Calif., City Council this week ordered the city’s management to shave another $5 million from the proposed 2009-10 general fund budget to keep pace with continuing declines in tax collections.

The reductions would push spending down to about $64 million from $83 million before the city’s bankruptcy.

“The near-term future does not hold much promise for a turn around,” said finance director Robert Stout and city manager Joseph Tanner in their budget letter to the council. “Our projections are that general fund revenues will fall further” over the next two fiscal years.

Vallejo continues to slash spending because its revenue continues to fall. It expects property tax collections to fall 10% to 17% in the fiscal year that begins July 1. Sales taxes are expected to drop 7%. The council responded to the latest revenue projections by demanding even steeper cuts than the city’s finance staff had recommended.

Vallejo declared bankruptcy in May 2008, and it has since reduced spending under the protection of bankruptcy. Earlier this year it agree to new labor contracts with police and management employees, but it remains deadlocked in negotiations with fire fighters and miscellaneous other workers. Those two groups face pay cuts of 2% to 5% under the proposed fiscal 2009-2010 budget plan.

The City Council also set June 1 as the last day of work for Tanner. The council earlier this year decided not to renew the city manager’s contract, and Tanner said he’d leave by the end of August. But the council pushed him out earlier to save $45,000. It still owes him a $390,000 termination payment.

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