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For several years, Mountain View has adopted a stable budget with strong revenue growth to support the city’s core services and capital projects. The city is still on track to adopt a balanced budget for the 2024-2025 fiscal year, but the surpluses are not looking as robust this time around.
“This really just is a stable budget. There’s not a lot of new bells and whistles like we’ve been able to bring before council in prior years,” said City Manager Kimbra McCarthy, who presented the budget to the City Council on Tuesday, June 11.
Revenues for the city’s general operating fund are expected to grow to $184.1 million next fiscal year, while expenditures are projected to grow to $192.3 million, according to the council report. With an estimated $8.5 million in planned budget reductions, this means that Mountain View will close out the 2024-2025 fiscal year with an estimated operating balance of $311,000.
The City Council viewed the projections positively, given the economic slowdown in the region as a whole.
“We’ve heard in the news, it seems like every day, there’s more information about the state’s deficit, or the county’s deficit, or San Jose’s deficit or somebody else’s deficit. So, the fact that we don’t have a major deficit is really good news,” Mayor Pat Showalter said.
But it’s not all good news. The report cited the possibility of future budget deficits in the range of $1.4 million to $4.4 million, according to Finance and Administrative Services Director Derek Rampone.
To keep a balanced budget going forward, the city may need to hit pause on hiring new staff or forgo adding new programs, unless other funding sources are identified, Rampone said.
Facing leaner times, the council is considering a potential tax measure to put on the November ballot that would help support major capital projects and infrastructural developments. But even that may not be enough, as sources of revenue have not risen like they have in past years. Several trends are contributing to this shortfall, McCarthy said.
One of the biggest losses of revenue is from the business license tax, which was approved by voters in 2018 and went into full effect in 2020. The tax is assessed on a tiered structure or a “headcount” based on the number of employees, meaning companies like Google pay the most.
Corporate layoffs have led to about a 15% decrease in revenue that otherwise would have supported transportation, affordable housing and other city programs, McCarthy said.
Mountain View’s property tax growth has also slowed down. Elevated interest rates have slowed down real estate transactions. Last year, there were 235 homes sold, as compared to 405 in 2021. Sales tax and hotel tax revenues also have leveled off, McCarthy said.
But while Mountain View is facing declining revenue streams, it has maintained adequate reserves with a longtime practice of “spending one time money on one-time costs,” McCarthy said.
The 2024-2025 budget does account for growth, just not as much as in previous years. This includes the creation of four new full-time positions, with three slated for the fire department and one for the police department. A part-time position also is slated for the community services department.
The council was largely supportive of the proposed budget, but with suggested tweaks to ensure key city priorities are funded. Council member Lisa Matichak proposed to have a larger contribution than $6 million to the sea level rise reserve, a project that is estimated to be about $122 million, according to the council report.
Matichak also suggested funneling more money into the strategic property acquisition reserve whenever possible.
“I so appreciate previous city managers, finance directors (and) council members who had the foresight to purchase property because it really differentiates Mountain View,” she said. “And it has been very good for our fiscal health.”
The council supported these recommendations, although Council member Margaret Abe-Koga expressed concern about the city’s pension obligations, and pressed for more clarification about how it would allocate one-time surplus funds.
McCarthy was optimistic that the city would be able to speed up its unfunded liability payments while also putting more money into its strategic property acquisition reserve. A full picture, however, likely would not emerge until the end of the calendar year when the city would have more numbers to go on, she said.
The budget will come before the council again on June 25 for final approval and adoption.
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They could consider undoing whatever they increased in 2022 when they were flush.
So wait…there is consideration for a tax and positions are being added? Looking at the graph it looks like council should recommend cutting back on some of those fluffy programs and purchases they approved. Are the unions asking for significant pay increases or something? A cost of living increase we can understand but anything more is just wow.
We see and hear a lot about programs that happen over the summer and probably spend more than they should. No wonder the finance people panic trying to balance everything at the end of a financial period.
Don’t let those individual departments overspending our problem.
Time to batten down the hatches.
No expansion of budgets
Eliminate unnecessary/discretionary spending
Increasing taxes is not a good idea
If they reflected on it even a little bit, they would realize that the residents of MV, just like everybody else, are experiencing inflation. I would be skeptical of the purposely distorted sound-bites from the media characterizing month to month inflation slowing. If you examine the source data, you will see where the inflations is, and it is not pretty.
There is a major gap between what the Federal Gov. is telling us about employment, and what the actual layoff reports are. On Wednesday, Jerome Powell, Federal Reserve Chairman, open questioned the misalignment also. Takeaway: Layoffs are significant and accelerating. Which should will impact tax revenues. I don’t want to hear “Oh gosh, we have a deficit, we didn’t expect so many layoffs!”.