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City's economic recovery slower than expected

by Sean Howell

Recovery from the global economic recession is coming along slower than expected for the city of Menlo Park, though the city's budget situation does not appear nearly as dire as that of some of its neighbors.

After adopting a balanced budget, the city now estimates revenue will come in $1.3 million lower than expected in the 2009-10 fiscal year, which ends June 30. Expenditures, however, have also been lower than expected, by about $750,000.

The city will look to make up the resulting deficit in its $38 million budget through stopgaps, such as delaying infrastructure projects, or use of the city's sizable general fund reserves, City Manager Glen Rojas and Finance Director Carol Augustine said in the mid-year budget report. The City Council will review the report at its meeting on Tuesday, Feb. 23, which starts at 7 p.m. in the council chambers.

"The existence of ample reserves has allowed the city to take a long-term approach toward achieving a structural balance and a measured response to inevitable economic changes," the city writes in the report, arguing for a second consecutive year that such short-term measures will leave the city well prepared for an economic recovery.

Ms. Augustine said that municipal revenues typically lag those in the general economy.

Though the revenue projections are lower than the city had initially expected, the revised projection still represents an increase of about $850,000 over the previous fiscal year. Expenditures are expected to rise at about double that clip, by $1.6 million.

The city anticipates that sales tax revenue will fall to $6.0 million, reverting to its level in 2003-2004, after those revenues had more than halved following the dot-com bust. The city received about $6.9 million in sales tax revenue during the 2008-09 fiscal year, and $7.7 million during the 2007-08 fiscal year, according to the report.

The city is expecting to generate $320,000 less than initially expected through a tax on hotel guests, partly due to the Rosewood Sand Hill Hotel falling below projections made prior to the economic downturn.