The nation-wide economic crisis that has dominated the news for the past few months is taking its toll on local government. Shoppers and travelers staying home, fewer real estate transactions, and underperforming interest income are all contributing to a 4.2% shortfall in revenues to the City’s General Fund from what is budgeted for fiscal year 2008-09.

At a midyear review of revenues to date held at the February 10, 2009 City Council meeting, an overview of projections for the fiscal year had very little good news to report. Although $133.5 million is budgeted for General Fund revenues in 2008-09, current projections are $127.9 million. City departments have been asked to carefully monitor their budgets to keep expenses on track or under their budgets, a managed hiring freeze has been implemented, and the City is ramping up economic development efforts. Even if expenses are trimmed and additional revenues are brought in, a $5+ million General Fund deficit is projected for this fiscal year.

Other City budgets are also experiencing revenue shortfalls.

The Water & Sewer Utilities have revenues at 42.8% of budget due to much lower than forecast sewer service charges, cutbacks by businesses and residents experiencing their own economic hardships, and water conservation in response to the statewide drought. Expenditures are at 48% of budget at midyear. Possible changes to rates and charges are being studied and will be discussed by the City Council later this year.

Although the Redevelopment Agency is expected to exceed its budget by about $2 million this year because of increases in assessed valuation for commercial/industrial properties in the North Bayshore area, the State is taking away $2.02 million from the City’s Redevelopment fund to help with the State’s own budget deficit problems. Revenues for the Sports & Open Space Authority and Santa Clara Convention Center are forecast to be under budget.

Here is a brief summary of how each major source of revenues to the City’s General Fund is performing. More detailed information on the budget and forecasts can be obtained on the City’s website.

• Sales tax revenue for the first half of the year was $13.9 million, compared to $15.6 million for the same period last year. Retail sales were down 10.2%, vehicle sales down 17.4% and business to business sales down 9.5%. The forecast for the end of the 2008-09 fiscal year is a $5.2 million, or 12.8% shortfall, from what was budgeted.
• Transient Occupancy Tax (TOT) for the fiscal year is projected to be about $1 million lower than what is budgeted.
• Property tax revenue is coming in slightly higher than what was budgeted because of increases in assessed valuation by the County Assessor for residential and commercial properties.  However, the County Assessor’s Office announced in February that it is reviewing valuations of about half of the homes in the County with the expectation that many have lost value.  The potential impact on City revenues from changed valuations is unknown at this point.
• Budget hearings for the 2009-2010 fiscal year will be held in May and June. Dates and times of the budget hearings will be posted on the City’s website and on the City’s cable TV channel. The 2009-10 budget will reflect the weakened economy, as forecasts for recovery of the national and regional economy do not expect to see much change until mid to late calendar year 2010, or early 2011.