The Fiscal Year 2023-24 city budget includes cautious revenue assumptions as we continue to face inflation and economic uncertainty. The last year has been marked with rebuilding and resilience as we fully emerge from the global pandemic, while experiencing ongoing economic aftershocks. In the last few months, Zero Motorcycle laid off 25% of its workforce in Scotts Valley, Salesforce pulled out of its multimillion-dollar contract with 1440 Multiversity and Giro/Bell announced it is closing its Scotts Valley office this fall. These losses will impact our tax base and workforce. On the positive side, we welcomed Ambient Photonics and the relocation of Poly, Inc. to Scotts Valley.
The City also endured major storms earlier this year, disrupting business activity, damaging roads, derailing our Public Works maintenance routine, and requiring staff to take swift action to keep the wastewater system from failing. The recovery efforts are still taking resources away from regular maintenance work and our essential Capital Improvement Plan (CIP).
Despite the challenges and economic uncertainty, our organization has been rebuilding, thanks to voter approval of Measure Z in March 2020. Last year, Measure Z accounted for $4.6 million of the City’s revenue, allowing us to hire key staff and shore up the Police Department to 90% staffing. Measure Z revenues are expected to remain flat this year.
Our efforts to rebuild the City’s infrastructure and organizational capacity have seen wins and setbacks. We made great strides in updating the City’s technology this year, including significant improvements to planning, building, maintenance and financial systems. The new city website is more user friendly, informative, and encourages civic engagement. Despite a challenging and competitive labor market, we have been successful in hiring and retaining several key staff members. In calendar year 2022, we hired 19 new employees.
• Overall revenue is projected to be $32 million, including $14 million in taxes.
• The budget allocates resources of $28 million for operating expenditures and an ambitious $14.8 million for capital projects, totaling $43 million.
• The Public Works operating budget totals $8.8 million and the Police operating budget totals $6.5 million.
• This budget includes spending accumulated fund balance of $5 million from the General Fund and $3 million from designated CIP funds. The budget also prioritizes borrowing $4 million to finance critical wastewater CIP projects.
• The Economic Development budget focuses on investments to prepare the Town Center for development. Activities also include completing the General Plan Update and Housing Element.
• Three new staff include a Wastewater Lab Manager, Chief Building Official, and Accounting Assistant.
• The city will receive up to $189,000 as the final payment, from a state grant to fund a Police School Resources Officer and related costs, for reducing use of tobacco products among school-age children.
• A $1.4 million grant will provide for the replacement of the Vine Hill Childcare facility with a new modular building.
• $750,000 in Congressional community project funding will replace playground equipment at Skypark.
• Four emergency road repair projects are prioritized for Bean Creek Road, Green Hills Road, Granite Creek Road and Scotts Valley Drive.
The City Council reserves funds for operations and capital projects. Having a healthy reserve is particularly important for Scotts Valley because of the volatility of our revenue sources. Nonetheless, the General Fund is expected to draw down reserves totaling $5.3 million this year as expenses outpace revenues for ongoing core services and one-time capital improvement projects, leaving an ending fund balance of $3.7 million, or 19% of operating expenses.
Long Range Planning:
While Measure Z stopped the immediate fiscal crisis the City faced in 2020, the city’s financial picture is still unsustainable over the next ten years. The city will need additional revenue to meet community expectations for street conditions, park amenities, recreation programming, and modernization of facilities. To help us understand these needs, Public Works has initiated the Parks Master Plan, Recreation Strategic Plan, Pavement Condition Assessment and Facility Assessment. With this information, the city will decide where to invest its limited funds, and how to raise additional revenue to support a thriving city.
The city is on an upward trajectory as we rebuild, amid a renewed optimism and commitment to what our small city can become.
I am grateful to the entire city team for their leadership and contributions to the budget. I also thank the City Manager for composing a proactive Budget Message, on which the content of this article is based.