Pleasanton's Finance Director Dave Culver warned the City Council Tuesday that lower tax revenues could hamper the city's efforts to maintain its current levels of services, programs and staff in the year ahead.
He said revenue from sales taxes has fallen to an estimated $15.5 million for the current fiscal year, which ends next June 30, from his projection of $16.5 million made only a few months ago.
"It looks like we could be down 14 percent this year if the recession continues, as receipts from auto dealers, business and industry and general consumer goods decline," he said.
Fees from developers are likely to total $1.3 million, not the $2.2 million that was projected when the current budget was prepared.
So far, property taxes are holding up, with valuations remaining about the same as a year ago. But Pleasanton won't see the consistent increases of 3 percent and more this year or next, nor the double-digit gains the city saw at the start of the decade.
Since property tax revenue accounts for 56 percent of the city's budget, just staying even will be an achievement, Culver said. Neighboring cities have seen major decreases in both property valuations and taxes, forcing a number of them to cut programs, services and employees. Livermore recently terminated 11 city employees as that city wrestles with a major budget shortfall. The city of Vallejo, which is going through bankruptcy proceedings, announced Tuesday that it is laying off six in its Police Department and making 17 reductions in rank effective Jan. 15 in an effort to resolve its budget crisis.
Tax revenues dropped slightly in the last budget year, down $143,752 or .16 percent to a total of $89.9 million. However, city expenditures for the year were trimmed even more, giving the city a $3.5-million surplus in fiscal 2008-09. That money has been added to the city's reserves to provide a financial cushion as tax revenue across the board declines.
Property tax revenues, at 56 percent the single largest revenue source for the city's General Fund, were up $2.2 million from projections for the year, a plus-4.5 percent variance. However, with assessed valuations expected to stay the same for 2009-10, the city is expecting no property tax gains this year.
Sales tax revenue for 2009-10 was below the budget estimate by $1.4 million, down about 7.5 percent. Projections for the year assumed a decline of 10.3 percent over the prior fiscal year, Culver said, but actual receipts were down 17 percent.
On the expenditure side, about 75 percent of the city's budget pays for labor, with public safety accounting for 44 percent of that. Total fixed operating costs are about 80 percent, for operations that include traffic and street lights and similar costs. Any major declines in revenue would likely lead to cuts in some of these services.
"Our concern is that if the economy doesn't turn around, we could find ourselves in the same position as other cities where we will have to consider service reductions," said City Manager Nelson Fialho.
"Right now, we have 35 vacant positions in the city government that we have not filled, from library clerks to police officers," he said. "There comes a time when we can't go much farther than that without making serious cuts.
Tuesday night's report was a review of the first three months of the 2009-10 budget. A more extensive review will be made in late January after an analysis of property tax payments for the current year and holiday sales receipts have been analyzed.