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Publication Date: Friday, March 02, 2001

Unexpected sales tax boom fuels $10.8 million city surplus Unexpected sales tax boom fuels $10.8 million city surplus (March 02, 2001)

By Justin Scheck

As America continues to ask whether the current economic boom is too good to last, Mountain View is experiencing first-hand the uncertainty that comes from economic flux.

After seeing nearly two years of declining sales tax revenue and formulating last year's budget to account for another year of losses, the city's 2000-2001 mid-year report projects $10.8 million of unexpected revenue to come into the city this fiscal year.

Approximately $4.8 million of this is sales tax revenue.

Even with this unexpected income, city officials are hesitant to break from the fiscally conservative path established over the last two years, citing economic uncertainty as a reason for continued caution.

"These are good times, but also uncertain times," said Council member Ralph Faravelli.

Council members Rosemary Stasek and Mike Kasperzak and City Manager Kevin Duggan agreed with Faravelli.

All four said the funds will give the city flexibility in future budgeting. But fears that Silicon Valley's economic foundation is crumbling have the city following the cautious financial route mapped out last year.

Duggan said, "We don't know if (the increased sales tax revenue) is a long term change. Frankly, we don't think it is."

Kaperzak concurred, saying, "I think the economic circumstances are changing in a more negative fashion."

Duggan said city staff will not recommend the council make any changes in city services, but will consider some high-priority staffing needs.

"Year after year, we can't say, 'Woe is us,' because no one will pay attention to us... We need to continue to be careful, but we can make funding decisions for one-time expenditures," said Stasek.

"I am just so reluctant to make long-term, recurrent expenditures," Stasek added. She said it is extremely difficult to cut ongoing programs once they have been funded, and this could be a possibility for programs that are started in years with abnormally high city revenue.

She said also that a significant amount -- about $2 million one year -- of the sales tax surplus came from Sun Microsystems, which is planning to leave Mountain View in the near future.

Stasek said that, because the revenue from Sun will disappear, the city has not included it in the budget for the current fiscal year. "As long as that revenue keeps coming in it will appear as surplus," she said.

She said she would like to see the surplus funds go toward the retiree health care reserve fund, which covers health insurance for retired city employees.

Faravelli pointed to the statewide power crisis as an added reason for future fiscal caution by the city.

"I've gotten more and more phone calls from people in their 80s and 90s who are choosing whether to pay PG&E or buy food," said Faravelli.

He said he would like find a way to subsidize power for seniors who cannot afford rising power rates, and added that utility rates for city operations could rise to a level where the surplus funding could be useful.

The city staff report presented to the council Tuesday highlights the fact that the city could actually capitalize on the rising PG&E rates, as the Utility User Tax will generate increasing revenues with increasing rates. But because of PG&E's shaky fiscal status, timely payment of those revenues may not be possible.

Kasperzak said he would like to explore the option of using the surplus to pay off some of the city's outstanding bond debts, thereby saving the city hundreds of thousands of dollars in annual interest.

"It's equivalent to paying down the national debt with the (federal) budget surplus," said Kasperzak.

In addition to the $4.8 million in sales tax, the city this year has seen increased revenues from a variety of other sources.

Property tax revenues were higher than expected, and the city also brought in $1.6 million more than expected from the transient occupancy tax collected from hotel guests.

In addition to the revenue surplus, the city also ended the last fiscal year with a carryover balance of $19.1 million, which has been dispersed into a number of reserve funds, as well as paying some of the city's debt. 


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