Mountain View’s midyear budget on track despite economic uncertainties

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Mountain View’s midyear budget is on track for the fiscal year despite projections that revenue streams are flattening while expenditures are rising, a trend that was in the city’s forecast when it adopted its budget last June.

Mountain View is expected to close out the fiscal year with an $8.2 million operating balance, a substantial increase from the $1.3 million originally projected for the year, according to Derek Rampone, the city’s finance and administrative services director, who presented the budget update to the City Council on Feb. 25.

But Rampone balanced the news with a cautionary note. The $8.2 million is better than what the city expected, but last year’s operating balance at this time was $16.1 million. “So, we’re realistically anticipating to have half of what we had at the end of June,” he said.

The City Council viewed the update positively, noting that Mountain View had a balanced budget even if its surplus was not as robust as in previous years. But they also expressed concern about the diminishing coffers and raised the possibility of exploring tax initiatives in the future.

“I wouldn’t pick any particular one at this point, but I want to do a study and see which will be most optimal, which will bring in the most revenue because we can’t do everything,” said Council member Alison Hicks.

A major economic headwind for the city is a slowing down in its revenue growth, according to Rampone. Mountain View is not experiencing the same growth as it has in the past from its property tax revenue, while sales tax revenue is also flattening.

“Sales tax is expected to come in $3 million lower than the budget due to slower spending in most categories,” Rampone said.

The local unemployment rate, which hovers around 3%, is expected to increase with corporate layoffs, which will negatively impact the city’s business license tax revenue, Rampone said.

The possibility of a federal funding freeze is contributing to economic uncertainties as well. The city spent $6.4 million in federal grants last year, with the bulk coming from the U.S. Department of Housing and Urban Development, Rampone said. The funding supported a rent relief program and the conversion of the Crestview Hotel into an affordable housing community.

The city also received $200,000 in funding from the U.S. Department of Transportation to upgrade traffic signals systems at Shoreline Boulevard and Villa Street. “As of right now, it is unknown if or when or how this funding may be impacted,” Rampone said.

As revenues are flattening, costs are rising. The inflation rate is high, as the Federal Reserve has not reached its 2% target and consumer prices are elevated — a situation that likely will not improve if tariffs are imposed on goods from Canada, Mexico and China, Rampone said.

Still, the city’s expenditures are coming in below budget this year largely because of staff vacancies, Rampone said.

Despite these uncertainties, the city is projecting an operating balance of $1.4 million for the next fiscal year. It anticipates that revenues will grow by $5.6 million, or 3% when compared to this year. However, expenditures are expected to grow by $12.5 million, or nearly 7%, Rampone said.

“Nobody has a crystal ball,” Rampone added, noting that a clearer picture will emerge by June, which is when the council will vote on next year’s budget.

Midyear budget adjustments

The midyear update also presented the Mountain View City Council with the opportunity to approve budget adjustments. Council members unanimously supported the staff recommendations, with the largest appropriations going towards Eagle Park Pool improvements ($1.5 million), parental leave costs ($210,000), public works overtime costs ($200,000) and a “Community for All” grant program ($100,000).

The council expressed particular support for the grant program, which seeks to give money to nonprofits and community-based organizations that protect vulnerable residents and preserve the city’s socioeconomic and cultural diversity.

“It’s very important for the fiber of our community,” said Council member Pat Showalter, who described the grant program as a way to help people feel welcome in the community.

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