National City is facing a nearly $12.7 million general fund deficit as city leaders grapple with rising costs and declining reserves, with the city manager warning that continued spending at current levels could eventually push the city into insolvency. City Manager Doug Schulze told the City Cou ncil at a recent meeting that the city could face insolvency by 2030 if it does not make significant changes to its finances. “Insolvency” would mean the city could no longer meet its financial obligations without major cuts or other measures to restructure its finances. Schulze said the city could face a growing funding gap in the coming years if current spending trends continue. National City is already drawing down its financial reserves. The city’s unassigned general fund reserves have fallen to an estimated $13 million, and Schulze projects they could drop to roughly $200,000 by June 2027. The city’s spending has also grown significantly faster than its revenue. Over the last five fiscal years, general fund revenue increased about 18%, while expenditures increased about 40%. Personnel costs have been a major contributor to the increase in spending. City Council members have proposed several ways to reduce expenses, including cutting management positions, freezing some salary increases, pausing new hires and consolidating departments. Councilmember Ditas Yamane said officials also need to consider how cuts could affect city employees and services. “We have to also think about the people that will be impacted,” Yamane said, pointing to employees who provide services including parks, pools and other programs. Schulze said city staff have identified roughly $3 million to $4 million in potential savings that could be achieved without significantly affecting services. Beyond those cuts, he said, the city would likely have to consider reductions that residents would notice. City leaders have also considered ways to increase revenue. One proposal would have placed a business license tax on the November ballot. The measure was estimated to generate about $7.1 million annually for the city’s general fund. However, the City Council voted 3-2 to remove the measure from the ballot following opposition from members of the business community. That means city leaders will have to consider other ways to close the budget gap. Some residents say they are concerned about the city’s financial future. Pete Giron, who grew up in National City, said he believes the city is spending more than it can afford. “I do know that they’re spending way more than what they’re bringing in,” Giron said. Giron said he wants to see city leaders prioritize National City as they address the financial challenges. Jose Lopez, who has lived in National City for several years, said he has seen improvements in the community and hopes residents continue to feel comfortable in their neighborhoods. National City is also preparing for a change in leadership. Mayor Ron Morrison announced this month that he will not seek reelection after more than 30 years in public office, meaning voters will choose a new mayor in November. Schulze said he will provide the City Council with monthly updates on the city’s finances through the end of the year. He is also expected to present a broader fiscal sustainability plan to the council in September. Whoever takes over as mayor will inherit a city facing difficult decisions about how to bring spending in line with revenue while maintaining services for residents. This story was originally reported for broadcast by NBC San Diego. AI tools helped convert the story to a digital article, and an NBC San Diego journalist edited the article for publication. ...read more read less