By Carolyn Schuk

 

Although Santa Clara ended fiscal 2008 -- the city's fiscal year starts in June -- with a $4.2 million surplus, and its fiscal 2009 budget is in the black, the City's five year forecast projects red ink for the next four years, starting in fiscal 2010. A flat – and possibly worsening – local economy will take a bite out of tax revenue, while new capital projects will add significantly to operating costs.

 

"With what's happening with our economy and our budget, we're right on the cusp of [a] slightly balanced [budget] or slight deficit," says the City's Finance Director, Mary Ann Parrot. "If nothing else changes and we continue to have a slow economy, we'll be in a slight deficit position."

 

Based on historical averages, the City's balance sheet will show chronic – "structural" -- deficits as annual expenditures grow slightly faster – 3.0 percent -- than revenue – 2.7 percent. The largest single item in the City's operating budget is salaries, benefits and retiree benefits, forecasted to increase 3.0 percent annually. The current forecast doesn't include the proposed 49er stadium, which is now slated to go to voters in 2009.

 

As a result, Santa Clara's contingency reserve fund will shrink from $20.7 million currently to $12.1 million in June 2013 -- 8.5 percent of the city's operating budget, or about one month's working cash. This is about one third of the minimum reserve level (90 days) established by the City Council policy in 1986.

 

In addition to the uncertain economy depressing revenue, an updated International Swim Center with four new pools – planned to open in fiscal 2011 -- and a new Northside branch library – opening in fiscal 2013 – are key contributors to the projected deficits. Operations and maintenance for these new facilities will add $1.4 million – perhaps more -- to Santa Clara's annual spending.

 

The forecast is conservative, according to Parrot, deliberately projecting revenue estimates lower than "best-case" and slightly overstating estimated expenditures. "That's the way you do things in municipal finance," explains Parrot.

 

With the City's annual budget a six-month undertaking, Parrot and her team are taking a short breather before they get to work on fiscal 2010. "It's a half-billion dollar budget with a lot of moving parts," says Parrot. "It's a very busy city."

 

The City's budget and five year forecast are available online at santaclaraca.gov/finance/fi_ann_budget.html, at the Central and Mission Library reference desks, and from the City Manager's office by calling (408) 615-2210.

 

Carolyn Schuk can be reached at cschuk@earthlink.net.