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New Budget Better Than Before

budgetThe city gets closer to approving its 2013 budget

The fact that the city’s budget dealings in recent weeks have been met by little upset may be a sign of increasing economic stability.

The Santa Cruz City Council unanimously approved to resolve last-minute changes to its Fiscal Year 2013 Budget at its June 26 meeting—the last opportunity for changes to be made or questions answered about the proposed budget, which they have been in deliberation about for months. The council also moved to vote on the final version at its July 10 meeting.

The outlook is good, despite a projected $3.3 million deficit in the coming year, says Marc Pimentel, director of finance for the City of Santa Cruz. Pimentel took up his position part way through the deliberations for the FY 2013 Budget, and says Santa Cruz is doing relatively well.

“Historically, even when [Santa Cruz has] had projected deficits, it’s always been able to finish the year balanced,” Pimentel says. “And as a whole, $3.3 [million] is big, but it’s less than 5 percent of our budget. It’s a really achievable level.”

Pimentel says Santa Cruz has actually reduced its deficit from a projected $8 million in February 2009—a sign that, to him, signals stability. He calls this year’s budget a “status quo” budget, as opposed to the reduction-heavy budgets that were common in past, post-recession years.

This anti-climactic nature perhaps contributed to the almost silent public comment period that followed the finalization of the proposed budget at the June 26 council meeting.

In Fiscal Year 2012, Santa Cruz had a structural deficit of $2.9 million. Pimentel says a large part of this year’s deficit increase comes from the council fulfilling its obligation to voters to fund road repairs and other items through Measure H, a .25 utility tax hike passed in 2006 to help fund road repairs, city parks maintenance and public safety, and also a 1.5 percent utility tax hike passed in 2010 to fund public safety. The revenues to be spent on the Measure H commitment to road repairs amount to $1.6 million in a capital cost.

This year, the city was also left to cover the previously state-funded redevelopment agency and the services it entails. After the state ended its funding for redevelopment agencies, Santa Cruz decided to fund the local agency itself through its General Fund.

“The state continues to take money away from cities,” City Manager Martin Bernal says. “It’s not until the state budget is balanced that the overall economy is in much better shape.”

Even if the city ended with a $3.3 million deficit next June, Bernal says that Santa Cruz currently has enough reserves to cover that projection. Pimentel adds that the city has not had to dip into those reserves for several years.

“The goal is to, over the long term, have a recurring budget that doesn’t project a deficit moving forward,” Bernal says. In order to do that, he says, “we have to be proactive about it.”

The city plans to tackle its structural, or recurring, costs through strategies developed by three tasks forces: the first is a revenue task force, which may present a plan at city council’s July 10 meeting to put a Transient Occupancy Tax increase on the 2012 election ballot; the second is an organizational review task force, which works at reorganizations of the general fund; and the third is a competitiveness task force, which helps reduce the barriers that allow businesses to come into town and also allows existing businesses to grow, Pimentel says.

Organizational review in itself is projected to save the city almost $1 million over two years, Pimentel says. The city also plans on supplementing the community sacrifices outlined in the task forces reports in order to finish the year balanced, adds Pimentel.

“We are going to be working with all departments on continuing reduction strategies internally,” Pimentel says. “With all four of these strategies we feel really confident in bridging that gap.” 

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