In a presentation Tuesday, city manager Kevin Duggan said Mountain View faces an estimated $5.97 million general fund deficit next year, and he added that "odds are" that number will get worse.
The city is bracing for less money in sales taxes and fees next fiscal year, plus about $4.5 million in increased costs, $3.8 million of which is due to the city's increasingly expensive union contracts.
"We are facing unusual economic times," he said, explaining that the economy is worse than he's seen it in his 30-plus years in city government.
Duggan already has conducted two "all hands" meetings with the city's 600 employees — over 200 showed up for each one — and city department heads have been asked to come up with 10 percent cost reduction scenarios. So far, no layoffs are planned, and Duggan hopes to repeat successes the city had with a hiring freeze after the dot-com bust; in that case, 65 positions were cut without a single layoff.
"Unlike many government agencies, we think we will have a balanced budget this year," Duggan said. But the 2009-10 budget is due in June, marking the first time in nearly a decade that the city will have to make significant cuts. Duggan said budget reviews may become a year-round affair, rather than once a year in spring.
To illustrate just how dire the situation is, Duggan pointed out that the city could eliminate the entire library budget of $4.7 million and still not cover the projected $6 million general fund deficit. "No one is proposing" a shutdown of the library, Duggan clarified.
Some have pointed to the city's massive reserves, but Duggan says most of that money is committed to special funds, pensions for retirees and real estate purchases that could become revenue sources.
"We do have a portfolio of $292 million," Duggan said. "A lot of it is committed and not a solution for us in regard to the general fund."
The city does have a $5 million "rainy day fund," however, and Duggan said he expects to use that money even though the city has almost never touched its reserves.
"We will be using reserves more than we ever used them before," he said, but hopefully only as "bridge loans." In the past, Duggan said, reserves had only been used to temporarily fund employee positions, never to fund an "ongoing gap."
The growth stops here
Duggan said many people think government is supposed to get bigger over time, but that hasn't been the case in Mountain View. Since 1991, Mountain View's city government has seen a net reduction of 16 employees, while the city's population has increased from 67,460 to 74,000 over the same time period.
However, the city's fire and police departments have added 21 employees since 1991, while the rest of the city government lost 37 employees. The police department — annually budgeted at $27.1 million — brings in $1.8 million in revenue, mostly from traffic ticket fines.
Police and fire went up from 36 percent of the city's budget in 1990-91 to 50 percent of today's budget, a reflection of a change in the community's values over time, Duggan said. Meanwhile, almost every other department was cut. Community services, which include parks and recreation, decreased from 16 to 14 percent in the same period.
A long-term problem
The city's Finance Department, now run by Patty Kong, has projected city budget revenues and expenditures out to 2019 with a "structural imbalance."
When the economy recovers, the city can't count on a lot of retail development to generate new sales taxes like other cities do, Duggan said. The city doesn't have enough land to build on.
Duggan mentioned the possibility of going to voters for a tax increase, something Mountain View has declined to do in the past. Mayor Margaret Abe-Koga mentioned increasing city fees that are currently below average. In a phone interview with the Voice, she also suggested creating fees for non-residents using the Senior Center. And sports leagues with a majority of non-resident players could be charged a special fee to use the city's ball fields, she said.
While the city expects to receive at least $800,000 in federal stimulus funds for road repairs and other projects, Duggan doesn't appear to be betting on a bailout.
"We know there is going to be sacrifice from everyone, including the public," he said.