Both anticipated revenue and expenditures are up since the 2021-22 fiscal year, after the effects of COVID-19 left the previous year's budget with a surplus of only $1.
The pandemic shrank the citywide budget since 2020, with the loss of $14.3 million in the fiscal years spanning 2019-21. Menlo Park's general fund, which covers basic city services, accounted for about half of that loss.
In contrast, the city's anticipated revenues are up considerably since the pandemic's peak.
"There's optimism but we also do have caution," interim City Manager Justin Murphy said. "When we look at the five-year forecast, there's some uncertainty for the future, there's some lack of revenue to fiscally sustain what's being proposed this evening."
After budgeting only $62.7 million for the general fund expenditures in 2021-22, the budget has increased 28% to $80.3 million for 2022-23. Spending is expected to outpace revenue, with only a predicted 17% increase in general fund revenue from the last fiscal year to $74 million.
One source of revenue is the American Rescue Plan Act (ARPA) is a federal grant that provides $8.3 million to Menlo Park that must be used by December 2024. The budget for 2021-22 allowed for the use of $2.91 million, of which only $850,000 was used. The 2022-23 budget includes $3.7 million from ARPA.
Council member Jen Wolosin argued that the money from ARPA should go directly to benefit the residents impacted by COVID-19 as the stimulus is a direct response to the pandemic, but there were concerns about the ability to balance the budget without aid from ARPA.
"I think when the ARPA funds were handed out to cities my initial thought definitely was to link it to those most impacted by the pandemic," Wolosin said. "I agree with what's been said about our budget tonight for this year, I feel like we need to balance the budget and we need this revenue now but we're going to have another four-something million coming."
However, if ARPA is required for the budget to balance, the city may have to pull from reserves or cut in other places to reallocate the grant.
"At the end of the day, if we don't balance the budget because we're not using the ARPA money for it, what we're really doing is ... we're using reserves for it, we're just calling it ARPA money," council member Ray Mueller said.
The council suggested using the $3.7 million from ARPA to balance the budget now and plan to discuss reallocating the remaining money the next cycle.
Another source of revenue for the city is sales and transient occupancy taxes, commonly called the hotel tax. Sales tax has remained relatively stable bringing in $6.6 million in 2021, $6.2 million in 2022, and an expected $6.6 million this coming year. Hotel tax revenue increased dramatically as the city recovers from the pandemic. After bringing in only $3.7 million in 2021, tax revenue increased 89% to an estimated $7 million over the last budget year. The city hopes to increase it another 28% to $9 million.
Several new projects were also proposed to receive funding this fiscal year, including renovations to Burgess pool, new equipment for park playgrounds, improvements to Willow Oaks Park and improvements for pedestrians and cyclists on Willow Road and Newbridge Street.
City staff is expected to increase this year as well, with many vacancies to fill and proposals to hire a full-time graphic designer for the city as well as a sustainability management analyst. Budget for salaries and wages has increased 45% with hopes of filling vacancies, raising from $20.4 million in 2021-22 to $29.6 million for 2022-23.
The council is set to vote on a final budget on June 28.