2001 was a year that changed our perspective of the world and recharged the feeling of patriotism in many of us. It also brought lower interest rates, increases in the cost for security, and a downturn in the job market.

Never in history has the Federal Reserve cut interest rates eleven times within one year. These reductions pushed the federal funds rate, the interest that banks charge each other, down to a 40-year low of 1.75%. The Federal Reserve also reduced its discount rate, the interest it charges to lend money directly to banks, by a quarter-point to 1.25%, the lowest level on record. These interest rate reductions were designed to be a means of giving consumers an incentive to increase spending and bring about a revitalization of the economy. The current economic slow down is not the result of a lack of capital in the market, but it is caused by a lack of consumer confidence that must be bolstered. But, despite the recession that began in March 2001 and the events of September 11, Americans have shown a resiliency to adversity and the economy will eventually rebound.

However, in addition to concerns about the general economy, there is concern about the talk of state tax increases and the state taking away traditional local revenues from cities. With this is mind, it is a good time to review the city's General Fund resources and spending priorities.

Lakewood draws its General Fund revenue from essentially five sources. They are sales tax, user fees, vehicle license fees, property taxes, and interest income, which account for 80% of the General Fund revenue. Much of this income is simply a "pass-through," or money collected to offset the direct cost of a service. These restricted revenues are refuse fees, building permit or inspection fees, recreation class fees, and CityTV programs fees. These types of fees are restricted for a specific use. This leaves the remaining General Fund revenue for such services as law enforcement, other recreation services, local street resurfacing, and street lighting.

Unrestricted General Fund revenue sources are limited and are dependent upon the economy, or continual state funding, or both. These revenues are three of the five largest General Fund revenues previously mentioned. They are: sales tax, which is heavily dependent on the economy; vehicle license fees of which 67.5% or 2/3rds is currently subsidized by the state; and property tax which is limited to six cents of every dollar of property tax collected by the County. These three revenues make up 74% of the unrestricted General Fund revenue.

Of the total unrestricted General Fund revenue received, 59% is used for law enforcement, recreation services, local street resurfacing, and street lighting.

Currently, Lakewood's biggest threat to city unrestricted revenues is the State of California. Because of its over confident revenue projections and the funds that the state has spent on the electricity crisis, there is talk of the state restructuring the traditional split of sales tax revenues, and reducing funds paid to the city related to vehicle license fees, along with tax increases. A cut in these two revenue sources could be devastating to Lakewood. Howard will be speaking about this next in much greater detail.

It is enough that local governments will have to deal with the effects of the current recession. This is not the time for the state to attempt to solve its economic problems by taking away from local government. As we begin work on the city's ninth two-year budget for fiscal year 2002-2004, it is our goal to continue to provide quality municipal services to the Lakewood community. Local governments, like Lakewood, need traditional local revenues to continue to repair and replace local streets, to provide recreational services, and most of all in these uncertain times, to provide for law enforcement services that insure the safety of our community.