TEMECULA ---- The city's midyear budget picture does not look all that bad despite the loss of $2 million that had been expected as part of a deal with the Pechanga Band of Luiseno Indians, city officials said Tuesday.

The deal ---- which involved the tribe paying $2 million a year for 20 years and $10 million for a new interchange at Temecula Parkway ---- fell through last year because of a clause that said the deal wouldn't take effect until the tribe and the county brokered a separate agreement.

When the negotiations between the tribe and the county stalled, the city filed a lawsuit to force the tribe to pay for an environmental study that, the city argues, would show the tribe owes the city up to $3 million a year to cover transit and public safety costs associated with the addition of 2,000 slot machines at the tribe's casino.

According to the budget documents approved Tuesday by the council, the city's anticipated revenue streams will suffer a 1.1 percent decrease of $608,037. The lion's share of the revenue hit is the loss of the $2 million but that sting is lessened by increases in property tax and sales tax receipts.

In response to the projected loss of revenue, the city has trimmed anticipated expenditures by 3.3 percent, a total of $1.78 million, cuts that will include dialing back some overtime costs and paying off bonds related to the community facilities district that was formed in the late 1980s to pay for infrastructure costs in the Ynez Road corridor.

Paying the bonds will allow the city to save $1.57 million in associated costs.
For the 2010-11 fiscal year, which started July 1, finance officials had projected about $54.5 million in revenue and about $54.4 million in expenditures.

The new totals are $53.21 million in revenue and $52.11 million in expenditures.
City Manager Shawn Nelson said, as a result of the moves approved Tuesday, the city is expecting to end this fiscal year with a $1.1 million cushion.
Call staff Writer Aaron Claverie at 760-951-4315, ext. 2624.