Upcoming spending cuts were revealed by the city manager through a press release late last week.</p><p>On Jan. 28 Steve Rath issued a six-paragraph statement on the unexpectedly dire financial situation Los Ba&#241;os is facing.</p><p>"Eighteen months ago we anticipated a significant decline in tax revenue," Rath stated in the release. "However, the decline has accelerated because of the continued economic downturn and the uncertainty as to when it will improve."</p><p>Property tax revenue for January was down 63 percent and sales tax dollars dipped 9 percent from last quarter and are experiencing an overall 22 percent decline from last year, according to Rath's press release and statements he made during a subsequent telephone interview.</p><p>Rath said he found out about the financial situation about two weeks ago when the county assessor's office released the figures.</p><p>"We're over a year ahead of ourselves. We didn't expect to be where we are until January 2012," Rath said, explaining the city's original estimates of tax revenue declines.</p><p>Because the city has less revenue coming in cuts have to be made. </p><p>"No public service can expect to be spared," the press release states.</p><p>Rath said the city is assessing expenditures in every department to determine where reductions can be made. He said all options are being considered, but he hopes city workers will not have to be laid off.</p><p>"We're not entertaining layoffs at this juncture," Rath said. "We really don't want to lay people off."</p><p>The city laid off more than 20 employees, including three police officers, in 2009.</p><p>Mayor Tommy Jones said last year's 3-2 vote in favor of the layoffs has allowed the city to remain solvent.</p><p>"Even as difficult as it was, we can say for fact if we had not taken the steps we took with those difficult cuts in 2009 the city would be bankrupt," Jones said.</p><p>Jones said he will diligently search for ways to get through Los Ba&#241;os' financial situation without laying off more staff.</p><p>Last November voters approved Measure A with 82 percent of the vote. It allows salaries of firefighters and police officers to be paid through a half-cent sales tax.</p><p>Rath is predicting further property tax declines in the future. He said before the recession ends it is possible that as many as half of the homes in Los Ba&#241;os will have gone through foreclosure and been re-sold. As that happens the homes sell for less money, causing the property taxes to be assessed at a lower amount. That means the city will receive less revenue.</p><p>Rath also is worried about commercial property that is being re-assessed by the county, as well as the possibility the state will take money from cities and redevelopment agencies to make up for its $22 billion deficit.</p><p>Rath said if commercial property taxes decline steeply it will not only be a blow to the city's general fund but it will also impact the amount of tax increment for the Los Ba&#241;os Redevelopment Agency.</p><p>Rath and Jones emphasized that Los Ba&#241;os is not alone, many municipalities are facing financial troubles.</p><p>Rath said it seems more severe in Los Ba&#241;os because of the large amount housing that came into the city in the first half of the past decade.</p><p>Rath said he expects to have more specific information on Los Ba&#241;os' financial condition by next month.