Mountain View ekes out balanced budget amid economic uncertainties

Mountain View is getting ready to greenlight a budget that is narrowly balanced, with little wiggle room to shore up money for new expenses as it grapples with an economic slowdown and the possibility of federal funding cuts.

“Our budget is less robust than it has been in prior years,” said City Manager Kimbra McCarthy, who presented the trimmed down budget to the City Council Tuesday, June 10.

Revenues for the city’s general fund are expected to grow to $195.7 million for the upcoming fiscal year, while expenditures are expected to grow to $195.4 million, according to the report. The balanced budget is predicated on some savings due to vacancies. The city anticipates it will close out the year with an operating balance of about $232,000.

While the budget is structurally balanced for the 2025-26 fiscal year, things are looking less rosy in the long-term forecast with modest deficits anticipated down the road, according to Derek Rampone, the city’s finance and administrative services director.

“We’re not experiencing the revenue growth that we saw the last few years,” Rampone said, describing particular volatility with the city’s business tax and sales tax revenue. Corporate layoffs are continuing to have a negative impact locally, he said, while store closures, audit adjustments and slower spending are contributing to declining revenues as well.

On the flip side, the city continues to see growth in its property tax and lease revenue, both major sources of revenue, Rampone said. The city also is banking on a property transfer tax that Mountain View voters passed last year. The tax is expected to funnel $8 million to $9.5 million annually to the city’s coffers, although it could be “bumpy” and “sporadic” depending on the number of transactions, Rampone said.

Another potential complication to the budget is the possible reduction or elimination of federal funding. The city has been awarded more than $35 million in funding for capital projects, the majority of which has not yet been spent or in some cases, formally budgeted as the city is waiting on signed agreements, Rampone said.

A big chunk, $10 million, is slated for an advanced water purification system shared with Palo Alto, while $5.1 million is for housing funds. There has been no indication that the funds are in jeopardy at this time, Rampone said.

However, the city has identified $3.1 million that could be at risk, including $1.6 million in housing funds, $1.5 million in sustainability funding and about $26,000 in police grants. The city also received a $200,000 sustainability and energy-related grant that is in a kind of “wait and see” period, Rampone said.

To boost ongoing revenue, the city is updating its “master fee schedule” to recoup expenses for services and programs delivered to parts of the community. The Development Services Fund, which collects building permit fees, has been experiencing an annual operating shortfall of $8.5 million, according to the report.

Councilmembers expressed support for “right sizing” development fees to help recover service costs, although Councilmember Lucas Ramirez questioned the impact, given the downturn in development activity in the city overall.

“Looking at multifamily housing starts this year and last year, I worry that even with healthy or a robust increase in fees, if we’re not seeing development occur in practice… then any dollar amount multiplied by zero is zero,” he said.

Even so, councilmembers backed the budget recommendations, including the funding of four full time staff positions, fewer than previous years but still significant.

“We’re now at the levels of staffing that we were at over two decades ago,” McCarthy said.

Councilmembers closed out the discussion with a favorable outlook about the budget but also noted the challenges of planning for growth amid so much uncertainty.

“We are the bulwark of government at the moment but at the same time we can’t forget what’s happening in other places and how other levels of government are impacting us,” Councilmember Pat Showalter said.

“I think that it’s always very important to have facts that we can hang our hats on and rely on,” she added, praising the work of staff.

This story originally appeared in the Mountain View Voice. Emily Margaretten joined the Mountain View Voice in 2023 as a reporter covering City Hall.