HAYWARD -- All things considered, Hayward has weathered the past few stormy years pretty well, said Mayor Michael Sweeney in this year's State of the City speech.

Sweeney credited city employees with accepting concessions and voters for passing a utility tax -- the latter enabling public safety services to remain fully staffed.

"We've been extremely fortunate that we haven't had to lay any officers off," Sweeney said at the Neighborhood Alert community meeting Wednesday at Southland mall. "In fact we were able to increase staffing. It says a lot, but it's been tough."

But he said that while the state of the city is "relatively stable," there are "a couple of enormous challenges" that must be addressed in the near future.

The economy remains in a slump, and the reduction in property taxes -- the largest revenue source for the city -- takes a lot longer to go up than it does to go down, said City Manager Fran David.

"When property tax has a heart attack, the general fund follows with at least a minor stroke," she said.

David said they don't expect to see increases in that revenue source until 2014.

She said 2010 actually ended better than expected -- they had predicted that the city would have to dip into the reserves for about $3.7 million. But the years' end balances showed a surplus of $8.7 million because of one-time interagency payments and fund transfers.

But that's not going to last -- a structural deficit exists that, if not checked, would build to a $74.7 million shortfall over the next 10 years, David said.

With the lion's share of city spending going toward payroll, David said short-term fixes could include more of what already has been seen -- employee furloughs, or other concessions from bargaining units.

But a long-term fix also is needed, and David said that will involve long discussions with worker unions.

Uncertainty with Sacramento's plans regarding getting the state budget in the black is another area of great concern, Sweeney said.

"The state unfortunately continues to look for ways to stick it to local governments," he said, adding that a particularly devastating blow would come from a proposed takeover of redevelopment dollars.

"It's one of the few tools we have to do infrastructure and other community improvements," he said. "Look at the work that was done at Burbank (Elementary) School. None of that happens without redevelopment."

Sweeney said another critical, yet "frustrating and exasperating" area involves Hayward's schools. While the city has no direct control over them, they are inextricably linked to Hayward's health.

"Hayward schools are at the bottom (of test score ranks), and homeowners know this," he said. "Academics, safety and discipline. Schools can be good at a lot of things, but if you don't have those, parents will vote with their feet."

He said that while the city has some after-school programs for kids run through the libraries, that's a "drop in the bucket" considering the 20,000 students in Hayward Unified.

Sweeney repeated a main theme from his speech given last spring -- that in order for kids to do better, they must be expected to do better. And those raised expectations should be held for parents, teachers, principals, the school board, superintendent, city employees, the Hayward Area Recreation and Park District, Chamber of Commerce and "all of us citizens."

"To do well, we need to reach out to the community," he said. "We've had some results, but I'm not satisfied, the city manager isn't satisfied, the police chief is not satisfied and I hope you're not satisfied.

"We have a long way to go before we are at the state where we want to see Hayward."

Contact Eric Kurhi at 510-293-2473. Follow him at Twitter.com/erickurhi. Read his blog at IBAbuzz.com/hayword.