During his 14-year break from law enforcement, Pacific Grove Police Chief Darius Engles forged a career in P.G. real estate. Though he’s been divested from the business in his 10 years with the PGPD, his salesman chops shined through during a July 16 presentation to the city’s Budget and Finance Committee.

Engles’ spirited PowerPoint held the attention of City Councilmembers Lisa Bennett, Carmelita Garcia and Bill Kampe, who’d sat through almost nine hours of City Council meetings – lasting until nearly 1am – the night before. The chief’s take-home message: The police department is already short-staffed and working on a shoestring. Any more cuts to its $5.2 million budget would compromise public safety.

“I’m so thin, I have to call people back for overtime,” he said.

But Finance Director Jim Becklenberg wants the city to trim about $800,000 from police and fire services, which represent 59 percent of the city’s $15 million General Fund. The hard part is figuring out how to do it while keeping the city safe.

P.G. has been making painful cuts for more than two years in an effort to stabilize its finances – and so far, the police department has been largely spared. At its July 15 meeting, the council borrowed $3 million from P.G.’s sewer, cemetery endowment and building funds to pad the General Fund in the face of a potential $2.7 million cash-flow gap in 2009-10.

Although the city’s fiscal year budget is technically balanced, P.G. needs short-term funding for the “dry periods” between property tax receipts in November and April. The General Fund reserves are nearly depleted, at less than $1 million, and the crappy market means the city can’t count on the statewide short-term loan fund it’s tapped in recent years.

Along with other city staff, P.G. police have offered some concessions. The chief and commander agreed to 5 percent furloughs for the current fiscal year. The Police Officers Association, whose contract promises a roughly 20 percent raise by January 2010, offered to take smaller raises through 2012, for a city savings of more than $1 million over the next three years.

But in a surprise move, the council rejected the furloughs and continued the concessions to a future meeting.

The city can’t get out of the California Public Employees’ Retirement System as long as a union contract is in place, says Bennett, who chairs the budget committee. The POA concessions would extend the police contract to at least 2012. “That ties our hands in getting out of CalPERS for another two years,” she says. “It doesn’t look like the best thing to do.”

Meanwhile, city officials are grappling with a $1 million projected deficit for 2010-11, growing to $2.5 million in 2014-15. In order to close that gap, Becklenberg recommends $2 million in long-term cuts, including eliminating $400,000 in city support for the library, and trimming about $800,000 from police and fire services.

P.G.’s fire department has already merged with Monterey’s, but Becklenberg says the city might shop around for a better deal. And while he doesn’t recommending losing police officers, he says there may be some other model – perhaps consolidating with another city, or creating a joint powers authority – that will allow P.G. to maintain the same level of police services while saving money.

“We’re challenged within our existing stand-alone model to cut costs,” he says.

Bennett says the city is stuck between a rock and a hard place. “We have to weigh public safety, which is absolutely critical, with economic viability, which is absolutely critical,” she says. “There are no good options here.”

In related budget moves, the city is exploring potential tax measures – hikes to hotel and business license taxes, and enactment of new parcel and real estate transfer taxes – for future ballots.  UPDATE 7/22: The P.G. City Council approved only the parcel tax for the November ballot.

The Budget and Finance Committee also advised the council to hire a bankruptcy lawyer. The expense is not in the budget.