Scotts Valley presents FY25‑26 budget proposal; council agrees to hold community grant program until midyear

City staff presented a proposed fiscal year 2025‑26 budget to the Scotts Valley City Council Wednesday that projects $30.9 million in total city revenues and a $20.1 million general fund. Staff described improvements in revenue management and department capacity but warned of a long‑term structural deficit that remains despite recent gains.

Admin Services Director Stephanie Hill summarized revenue sources and projections: the city’s general fund is roughly 65% of total city revenues, taxes make up 76% of general fund revenue and sales tax represents about 46% of the tax base. Staff forecast sales tax to be flat for FY25‑26 and reported an anticipated $1.1 million increase in general fund revenues driven by charges for services, business license changes (Measure X phase‑in) and engineering recoveries. On the expense side, salaries and benefits make up the largest share and include increased pension (CalPERS) liabilities; the city has set aside $2 million in a pension trust fund to smooth spikes.

Hill said projected FY25‑26 expenses total about $36.1 million (including capital), leaving a manageable but persistent long‑range deficit that staff and the budget subcommittee have been working to reduce. The department also reviewed fund balance changes, wastewater enterprise needs, and capital program funding. A 10‑year forecast in staff slides showed an improving but still negative trajectory without additional revenue measures.

Council members and the budget subcommittee praised staff for fiscal work that reduced the projected shortfall compared with prior forecasts and for consolidating and clarifying special revenue fund purposes. Several council members said they want a public review of potential revenue sources (for example, transient occupancy tax and other measures) before future election cycles.

On the community grant program, staff had initially proposed deferring new community grant awards pending midyear revenue updates. During discussion the council gave direction by consensus to include $50,000 for the community grant program in the FY25‑26 budget but to delay releasing the application materials until the midyear review (as the council did in the prior year). City staff confirmed applications would not be processed or awarded until after the June midyear check if revenues tracked favorably.

Staff will return with the final budget for adoption in June and will continue to monitor sales tax, business license revenue and federal reimbursement timing (notably FHWA reimbursements related to storm repairs) that affect near‑term cash flow.