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Editorial: Exercises in budgetary caution
June 11, 2014, 05:00 AM Editorial

Several San Mateo County cities are reporting a rosier budget picture than in years past. In San Mateo, there is $7.8 million more revenue than last fiscal year and Foster City is reporting a $1.2 million surplus, however, some of that may change depending on labor negotiations.

Aside from Millbrae, which is reporting that it is spending more money than it is taking in, other cities are reporting more revenue than expenditures.

That’s good news for sure, particularly after years of budget shortfalls and painful cuts. But those years of cuts also meant putting off raises for city employees, asking city employees to pay more into their benefits package and putting off capital improvements like street repairs.

In San Mateo, a quarter-cent sales tax to help fund city services is set to expire in 2018 and the city must begin to make plans for its end. The city of Belmont has approximately $100 million in deferred maintenance to streets, storm system and parks.

So while there is a little more breathing room, there is no reason to start breaking out the city checkbook to fund new programs. It is refreshing that city officials are taking a cautious approach and recognizing that reserves must be filled to ensure there is enough to get by in tough times, and that new solid streams of revenue should be spent wisely.

However, as it is in Sacramento, there is always a push to start new programs when there is a little bit of breathing room, or at least fully fund programs that were cut when the economy was sour. In Sacramento, Gov. Jerry Brown is proving to be the ballast to such pulls and is constantly pushing for more reserves and more caution though even Brown has his money-sucking pet projects like high-speed rail and the Delta tunnel project. Still, the overall attitude of prudence is refreshing and merited particularly when the Controller’s Office just released his monthly report Tuesday that showed revenue estimates missing the governor’s projections by 5.5 percent, or $389.1 million.

The elephant in the room continues to be pension obligations. Rates are going up and there are more pensions to pay for more people who are retiring earlier with higher pensions and living longer. Until cities get a handle on that debt, there can never truly be breathing room in any budget.

Increased revenue is largely from sales and property taxes. While property values have largely returned to the levels pre-recession, there are fewer sales as inventory remains sparse. Sales taxes are returning, but are constantly threatened by online sales with revenue funneling to other parts of the country. Hotel taxes are also on the rise, but do not account for a large portion of any city budget.

So while revenue is on the rise, it’s still just a bit better than it was before without a large influx projected. And that’s OK. Stable is OK, as long as cities are cautious with their money. It appears as if they are.

The budgets San Mateo County cities are outlining are not Gold Rush budgets like those seen during the dot-com boom in 1998-2000. It is those budgets that sparked the pension obligations in the first place as retirement agreements got richer.

Rather, the budgets of today express an uptick in revenue with strong projections based on always shaky forecasts. City officials seem to be treating it as such, with reservations, with caution and with the understanding that we are just one economic calamity away from a downturn again. And that’s nice to see, particularly when there are always pulls for more spending in disparate and manifold ways.



Tags: there, revenue, sales, cities, mateo, million,

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