Publication Date: Friday, December 02, 2005
City's financial outlook stabilizes
City's financial outlook stabilizes
(December 02, 2005) But effort to boost flagging sales revenues continues with new retail plan
by Bill D'Agostino
The era of deficits is over, but the City of Palo Alto isn't out of the woods.
That's the clear message from the city's "Long Range Financial Plan," a 10-year financial analysis released on Thursday.
In the past few years, the city made painful cuts in its staffing and services, primarily due to deficits caused by the stagnant local economy and exploding benefit costs. But, according to the new report, revenues are now expected to slightly exceed expenses for the next six years, thanks to those earlier cuts.
The 37-page report tempers that somewhat bright positive outlook with warnings that the local economy faces potential pitfalls such as increasing energy costs and the possibility the "housing bubble" could burst.
"The local economy, as well as the national economy, is likely to continue a slow, bumpy ascent towards stability," concluded the report, written by the city's financial experts.
The modestly positive fiscal news comes as the city progresses on a two-year-old effort to become more business friendly. Sales tax is the largest revenue source for the city. Palo Alto's general fund is $124 million in 2005-2006, with the city projecting to receive $20 million from sales taxes.
In 2004, then-Mayor Bern Beecham formed a committee to garner ideas to retain Palo Alto's retailers; a second committee met earlier this year to gather ideas to attract new businesses.
Beecham, the chair of both committees, said that despite the slightly rosy forecast, the city needed to continue to find ways to support its already existing retailers and court new businesses.
"Without doubt," Beecham said. Some staff members are stretched too thin, he explained, plus the modest projected surpluses will not be enough to pay for new projects or services.
The council's Finance Committee is scheduled to discuss the Long Range Financial Plan on Tuesday night.
Meanwhile, the Retail Attraction Committee is scheduled to present its recommendations to the City Council and the Planning and Transportation Commission on Dec. 12.
"This is the beginning of the discussion," Beecham said.
The city's projected budget surpluses -- primarily the result of a modestly rebounding local economy -- are not huge, growing from $1.4 million in 2005-2006 to $3 million in 2009-2010, according to the Long Range Financial Plan. Plus, the city places $1 million of its reserves each year into a fund to maintain its buildings, roads and other physical assets, leaving little wiggle room if the projections come true.
In addition, Palo Alto's retailers face pressure from cities that have been building big-box stores and upgraded shopping centers, according to the report. And auto dealers are continually threatening to leave the city for locations giving them more land and more visibility.
"If we don't take action we will be losing local sales to other locations," Beecham said.
Those concerns led Beecham to propose a three-year plan this week to set goals that, he said, would secure the city's financial health. The plan is an attempt to focus on the most important desired outcomes of the recommendations from the two retail committees.
The five major goals Beecham proposed: build a new conference hotel, ensure Fry's Electronics remains in Palo Alto, retain and support auto dealers, encourage corporations to have sales offices in Palo Alto, and increase sales at Stanford Shopping Center.
Stanford Shopping Center is the city's single largest source of sales tax. Retail Attraction Committee member Karen White said that the center is "under increasing competition from Valley Fair, from Santana Row and other shopping centers that have a regional draw. We need to make sure it continues to remain competitive."
One option is to allow the new managers of the center to expand.
Besides the five ideas highlighted in Beecham's report, the committee has made other recommendations: start a business-license fee so the city has a list of all its various businesses, explore a free wireless Internet zone in downtown and start a Redevelopment Agency project.
Councilman-elect John Barton, who is also the past chair of the Chamber of Commerce and a member of the retail committee, also argued the city needs to hire more staff dedicated to economic development.
Last year, the council voted to lay off one of two staff dedicated to economic development. The city needs to send a message that it's serious, Barton said.
"We have to spend money to make money," he said.
Staff Writer Bill D'Agostino can be e-mailed at bdagostino@paweekly.com.
E-mail a friend a link to this story. | 
