[Hpn] CA -- Already strapped, Bay Area cities facing more cuts
Mon, 22 Oct 2001 13:43:54 -0700
Already strapped, area cities facing more cuts
Published Monday, Oct. 22, 2001, in the San Jose Mercury News
BY RENEE KOURY, KEN MCLAUGHLIN
AND MIKE ZAPLER
Just a few months ago, communities from San Francisco to Monterey were
adding services for the homeless, repaving streets and even building
skateboard parks. Now, as the impact of Sept. 11 cascades through the area's
economy, they're preparing to slash programs and possibly lay off municipal
``We see real trouble ahead if we're not careful,'' Santa Cruz Mayor Tim
Economic trouble began brewing in the Bay Area with the dot-com collapse,
but it has accelerated as Americans fearful of future terrorist attacks stay
closer to home and keep a tight grip on their dollars.
What worries city and county officials is the same thing vexing Silicon
Valley business leaders: With a war under way, consumers being cautious and
a global economy on no clear course, they simply can't predict how far
revenues might fall.
They do know, however, that far fewer travelers are coming through Bay Area
airports. Hotel occupancy has plunged. People are eating out much less.
Sales of big-ticket items such as cars have dropped. Construction projects
are being delayed or halted. Companies are slicing payrolls.
It all adds up to less tax revenue for municipalities. And even though some
cities built up reserve funds during the good times, officials are now being
asked to put off projects and plan for cutbacks.
Street improvements, parks, recreation programs, sewer maintenance, stop
lights -- all are coming under scrutiny in San Jose, where the financial
picture looks darker than at any time since the recession of the early
1990s, said budget director Larry Lisenbee.
It's too early to tell, he added, but ``layoffs are not out of the
Elsewhere in Silicon Valley, cities are still taking stock. Some vacant
positions may be frozen in Palo Alto. In Mountain View, there's been no
hiring freeze or talk of layoffs. But department heads there have been told
to get ready to recommend cuts but haven't yet been told how deep.
In Newark, construction of an aquatic center, proposed to open in 2003,
could be delayed again, suggested finance director Jim Reese.
San Francisco, which like Santa Cruz and Monterey is heavily dependent on
hotel taxes and tourist spending, is considering freezing positions or
eliminating some new programs such as hepatitis health education and tree
City Controller Ed Harrington has projected a budget shortage of as much as
$100 million in this year's $5.2 billion budget. Much of the loss is in
hotel taxes, which brought in $195 million last year but may garner only
$146 million this year.
That will be a particular blow to fine arts programs, the Moscone Convention
Center, the city's Convention & Visitors Bureau and a low-income housing
program. All get part of their funding directly from hotel taxes. Under
worst-case projections now being made, they could lose about $11 million
Fitzmaurice indicated that Santa Cruz may be forced to look at cuts in
police and in park and recreation services. ``We might not have the money to
do basic city business,'' he said.
As bad as it is now, cities around the region are bracing for the
possibility that the next fiscal year -- which begins in July -- could be
far worse if there's no economic rebound soon.
``For us, this year is really not going to be the problem or tell the
story,'' said Matthew Hymel, San Francisco's chief assistant controller.
``The real question is how much money we'll get for next year and how much
we'll be able to continue offering services that are heavily dependent on
state and federal dollars that might not be there.''
Counties, for example, are worried about losing their portion of state
vehicle registration fees, said Pat Leary, a legislative representative for
the California State Association of Counties. ``We're extremely concerned
the state might take that money to make their budget whole.''
Many Bay Area governments are still working to develop shortage projections.
They won't have a clear picture until December, when sales taxes collected
after the terrorist attacks are reported. And with the uncertainty caused by
terrorism threats, the U.S. campaign in Afghanistan and the volatile stock
market, most finance officers are loath to make firm predictions.
``This thing may just be a `V' and may come back up quickly, but we really
don't know,'' said Reese, Newark's finance director. ``We have not been
keeping track, but we will be watching intensely in the next three to four
The city had already reduced its budget by 20 percent because of the general
The task is even tougher now as department heads already scaling back are
being asked to look for even more savings.
Some declines budgeted
San Jose had already budgeted for a 14 percent decline in sales tax revenue.
Occupancy at the San Jose McEnery Convention Center is down 25 percent from
last year's peak.
And now, San Jose International Airport plans to spend an extra $9 million
annually on security -- more than doubling its security budget -- amid a
major drop in revenues that could postpone several capital projects.
Projects on the books include $3.5 million for a new bridge to rental car
facilities and $673,000 for new vehicles.
``We'll try to preserve the major services like public safety, but we're
expecting a big shortfall heading into next year's budget, and we'll be
looking at reducing some things people may not like,'' said Lisenbee, the
city's budget director.
Palo Alto is looking at drops of ``several million'' from this year's $125
million general fund budget because of significant tumbles in sales and
hotel tax revenues because of the slumping high-tech industry and the
terrorist threat, said City Manager Frank Benest.
Just how deep?
Teams of managers and staff are working out ways to trim costs, increase
revenues and improve efficiency. Some vacant positions might be frozen. ``We
want to make cuts now rather than wait until the end of the year, when
things could be worse,'' Benest said.
First-quarter revenues in Mountain View -- its budget is $77.4 million --
were already down by more than $3 million over last year, in part because of
a big drop in sales tax payments from mainstays such as Sun,
Hewlett-Packard, Agilent and Allison BMW.
``The only question is how deep will we have to cut,'' said finance director
Robert Locke, ``not whether we'll have to belt-tighten.''
Mercury News Staff Writers Truong Phuoc Khánh, Chuck Carroll and Marian Liu
and wire services contributed to this report.
**In accordance with Title 17 U.S.C. section 107, this material is
distributed without charge or profit to those who have expressed a prior
interest in receiving this type of information for non-profit research and
educational purposes only.**
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