$83 Million Deficit Projected for Palo Alto

The amount of cash Palo Altans are pouring into City coffers is steadily increasing, yet still not keeping pace with the skyrocketing costs of employee pensions and health care, according to a forecast presented to City Council Monday.

If measures are not put into place to reverse that trend, the City is in danger of being a combined $83.4 million in the hole by 2022, according to the “General Fund Long Range Financial Forecast,” produced by the Administrative Services department.

“The City’s revenue projections are more positive than they have been in a few years,” according to the report. “However, benefit costs continue to outpace the rate of revenue growth.”

The forecast is not designed to be a hard-fast prediction, per se, because it is based on a number of assumptions that may prove to be inaccurate on some level. Nonetheless, it offers a “snapshot” of the troubles ahead for the city if drastic changes aren’t made to its “structural deficit,” according to the report.

The City Council managed to squeak through a balanced budget in 2012 by winning last year, among other cutbacks.

To achieve similar cuts moving forward, however, Council may have to , raise taxes and fees, make permanent some position freezes, enter into public/private partnerships, and bring union compensation down to a level equal to other city employees, among other measures.

The City of Palo Alto is on track to pull in more than $150 million in revenues this year, increasing to nearly $200 million in 2012, according to the forecast. But costs this year, which will hit nearly $154 million, are forecast to rise to $213 million in that same amount of time. By then, the reserve fund that was tapped to balance this year’s budget will be gone.

Making matters worse, the staff report does not include any additional spending on “catch-up” infrastructure projects—that is, the —but rather only “keep-up” projects that represent the bare minimum required to keep the City intact, at a cost of $2.2 million per year.

“This Forecast shows that, without further action, the City can expect more deficits in the coming years,” according to the report. “However, the City has received a vote of confidence in the form of a General Obligation Bond Triple‐A credit rating from Standard and Poor’s. Staff trusts that the community, Council and staff will act, as they have in the past, to balance the budget and to maintain the assets that make Palo Alto a renowned place to live.”

Follow us on Twitter | Like us on Facebook | Sign up for our daily newsletter | Blog for us