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Mountain View’s budget is on track with revenues and expenditures largely adhering to the city’s projections, marking good news after years of pandemic-related declines. But the future financial outlook beyond this fiscal year is not looking quite as rosy as before.
The City Council unanimously approved mid-year budget adjustments on Tuesday, Feb. 27, with revenues now estimated to be $12.6 over expenditures for the 2023-24 budget year, an improvement over what was expected last year. As part of the package, the council also approved the creation of a new position for a housing officer at the Feb. 27 meeting.
Derek Rampone, the city’s finance and administrative services director, presented the midyear report with an overview of the city’s financial outlook, addressing some of the major touchpoints impacting the city’s revenues and expenditures.
Although property values remain high, transaction sales have declined significantly, he said, resulting in lower property transfer tax revenue and lower growth and assessed property tax values. “While the city has experienced that nearly double-digit growth in prior fiscal years, we’re now expecting that growth to be half of what it’s been recently,” Rampone said.
Rampone also discussed the city’s unemployment rate, hovering around 3%, which is lower than the national rate of 3.7%. But as more corporate and tech layoffs are implemented, this likely will impact the city’s unemployment figures, Rampone said.
The issue of remote work, with fewer workers coming into the city on a daily basis, has had a negative impact on sales tax revenue too, Rampone said.
Still, in many categories, revenues actually were trending higher than the city anticipated when it adopted its budget last June. Property tax revenue was $74.3 million, essentially the same as the adopted budget figure, but sales tax revenue was $25.9 million, 3.1% higher than budget, based on the strength of restaurant and hotel recovery, according to the council report.
Transient Occupancy Tax (TOT, or hotel tax), as well as utility users tax, intergovernmental revenue and miscellaneous revenues also were trending higher. Other categories were basically the same or trending slightly lower, according to the report.
The city also saw some savings with its expenditures, which was “projected to be about $2.7 million or 1.6% less than the adopted budget,” Rampone said. Staff salaries and benefits were the largest driver of the savings, as there were a lot of vacant positions and personnel turnover in the first part of the year, according to the council report.
The midyear review provided the city with an opportunity to make adjustments to its budget as well. The council approved the transfer of $6 million to funding reserves that included the open space acquisition reserve ($3 million), transportation reserve ($1 million), parental leave reserve ($1 million) and liability insurance fund ($1 million).
The council report also addressed two funds operating at a large deficit: the Development Services Fund (DSF) and Shoreline Golf Links/Michaels at Shoreline Restaurant. The DSF had an operating deficit of $8.7 million, which was $4.3 million higher than budget. The report attributed the deficit to the timing of development fees and services, which is asynchronous, as well as to fewer development applications being submitted to the city, resulting in less building permit revenue.
Michaels at Shoreline Restaurant was operating at a deficit of $207,000, which the report attributed to remote-work conditions and fewer employees patronizing the restaurant.
The city is still analyzing its anticipated revenues and expenditures for the next fiscal year. However, the budget is already being modified to reflect a potential economic downturn. The city is now projecting $185.2 million in revenue, a $3.1 million decrease from its June update. Expenditures meanwhile are estimated to come in around $185 million, a $1.8 million increase from previous forecasts, Rampone said.
“These updated projections have resulted in a projected ending balance for fiscal year 24-25 of $185,000, which was compared to $5.1 million just nine months ago,” Rampone said.
I guess it’s time to stop handing out free money (basic income).