April 28, 2010: Santa Clara Revenues Down, Deficit Doubles

By Carolyn Schuk

The City of Santa Clara is in a world of financial hurt. The City Manager's midyear budget review shows this year's total tax revenues – roughly 60 percent of the city's operating budget – down nearly 7 percent from last year.

City of Santa Clara Tax Revenue and Budget Deficit: The chart shows 

actual 2008-2009 city revenue, budgeted 2009-2010 revenue, and 

the adjusted 2009-2010 revenue forecast. Declining sales and transient 

occupancy (hotel) taxes account for the largest share of the drop in 

City tax revenues. Correspondingly, Santa Clara's structural budget 

deficit is rising; requiring the City to use its emergency reserve funds 

to make up the difference. 

As a result, the City's budget gap will increase by $8.5 million to a total of $13.5 million for the year – even after a $2.1 million reduction in City expenses. This will leave Santa Clara with only $2.5 million in its emergency reserves at the same time the City is likely to face an even larger deficit for the 2010-2011 fiscal year, City Manager Jennifer Sparacino told the City Council at its April 20 meeting. "I've worked for the city for the last 30 years and the situation is by far the worst I've ever seen."

The largest hits to Santa Clara's revenues come from declining sales and hotel taxes, down 14 and 18 percent respectively. "We have some ideas [about addressing the deficit]," Sparacino explained, saying that City staff was "working on a plan to take Santa Clara's structural* deficit and get where we need to be.

"At the next City Council meeting we'll be presenting budget principles [for 2010-2011]," she continued. "And on May 11, [we plan] to start [budget] study sessions. The Council's study sessions will be online. We plan to get more information out about our budget plans to the community…and the business community."

Sparacino emphasized that 'buying local' can make a difference. "It's very important that people buy in Santa Clara," she said. "An important source of sales tax is business-to-business sales – when businesses sell to other businesses in the City."

Two big concerns for the City's budget are the planned new Northside library and improvements needed by the International Swim Center. "The Northside library is funded for capital construction. Our problem is trying to run it once it's built," Sparacino said, recommending against starting the project in the current circumstances.

"The international swim center – that's a huge hurdle," she continued. "I don't see that capital fund growing. I think we have to build up our emergency reserves before our capital reserves. I don't see that project going forward for the next five years."

Both of these building projects have been repeatedly postponed. "I remember that we were approving 17 percent raises for city staff while we were postponing…the Northside library and the International Swim Center," observed Santa Clara resident Kevin Parks.

"If all we're worried about is staffing, why don't we be heroic? Just the raises for the City Manager and the City Clerk…. would be enough to staff the Northside library. I would be willing to volunteer at the library for free, if I could see the city staff step up."

While City employees are covered by a variety of agreements (Memorandums of  Understanding, MOUs, most city employees received raises of about 5 percent in 2009 and 2010.

Read the City Manager's budget report here. The entire Santa Clara city budget can be found here. For more information, call the City's budget department at (408) 615-2340.

* A structural deficit is chronic and long-term, as opposed to a "cyclical" deficit caused by economic conditions. Structural deficits require explicit and direct government action to reduce spending (including entitlements), and increase the tax base or tax rates.