Publication Date: Wednesday, February 27, 2002
Budget crunch ahead
Budget crunch ahead
(February 27, 2002)Part of the lure of the IKEA store for city officials is the $1.6 million to $1.8 million bump it will bring to the city budget annually.
Because of several factors, including the recession, East Palo Alto is projecting a $182,000 budget deficit for the fiscal year ending June 30, and a $2 million deficit for the 2002-03 fiscal year.
The city's annual budget is about $13 million.
"I'm convinced we're in a dire situation, and it's about to get worse," Mayor Duane Bay said late last year.
Part of the city's financial difficulties is a result of having to pay homeowners $1 million a year for the next three years after a court found the city had earlier illegally imposed a parcel tax.
Also looming over East Palo Alto -- and other cities and counties -- is a huge state budget deficit of $4.5 billion deficit this year and a projected shortfall of $12.6 billion to $14 billion in 2003. The state could decide to take away motor vehicle in-lieu fees it now provides to cities, including $1.3 million to East Palo Alto this year.
While IKEA would help the city financially if the voters approve it next week, the city is also waiting for a planned 220-room hotel to be built at University Circle. The hotel is expected to bring the city more than $2 million a year after a it opens.
"We're waiting for our ship to come in," City Manager Monika Hudson said late last year about the hotel.
-- Don Kazak
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