SANTA CRUZ >> At its meeting Wednesday evening, the Scotts Valley City Council reviewed the city’s proposed fiscal year 2025-2026 budget and provided feedback. The presentation from city staff began with an overview of the budget process from Scotts Valley City Manager Mali LaGoe.

“The budget process is a cycle,” said LaGoe at the meeting Wednesday. “We are really working year-round. We bring the mid-year budget to your council for review and any amendments, and that usually happens in the December, January, February timeframe. That’s when we have the previous year’s audit and look at what’s happened in the first half of the current year and we revisit our budget policies.”

LaGoe said that tentatively in the spring, each city department reviews its budget. The city’s finance team then begins to gather the departments’ revenue and expenditure data and puts it together for the upcoming fiscal year’s proposed budget, which is then presented to the council to get feedback before the final budget is adopted at a subsequent meeting.

The city manager then outlined the city’s short-term strategic goals, including maximizing the use of city resources, promoting public safety, supporting economic development, affordable housing and recreation, improving city facilities and furthering the Scotts Valley Town Center project.

“All of these goals were used to inform this budget,” LaGoe explained. “I just wanted to cover some of the strengths and the challenges we’re facing and I broke those into four categories.”

Those categories included operational, financial, legal and strategic culture, or the culture of the city government. LaGoe discussed the ups and downs of each, beginning with city operations.

“Operationally, we’re much stronger than we were last year or the year before,” said LaGoe. “And that is because we are fully staffed. It’s because of the systems and standards that we’ve implemented across administration and public works and all of our departments working together and having better, more efficient systems that we’re using.”

LaGoe mentioned operational challenges such as deferred infrastructure maintenance and the loss of institutional knowledge when employees retire. On the financial side, LaGoe said that city tax measures X and Z have been critical to improving the city’s financial situation and that each city department has examined its spending to find ways to “save on the expenses side and be creative on the revenue side.”“For challenges, we all know that being a low property tax city is probably the biggest challenge we have financially as a community, and also economic uncertainty,” said LaGoe. “Sales tax is not looking great statewide and we’re tracking that and monitoring it.”

Following LaGoe’s broad overview of the budget and the city’s financial health, Scotts Valley Administrative Services Director Stephanie Hill went more into detail about the city’s revenues, expenses and long-term financial forecast. Hill mentioned that a large portion of the city’s revenue, about $7 million, comes from sales tax.

“Sales tax is by far the majority of what we rely on, and you can see that starting to dip down,” said Hill at the meeting. “We are hoping that it does remain flat so we will definitely be monitoring this and coming back at mid-year with any different adjustments.”

The city’s overall expenses in the next fiscal year are expected to be about $36.1 million and with the revenues for the 2025-2026 fiscal year budget at about $30.9 million. Hill pointed out that city staff had conducted a citywide review of its different fund categories and was able to pin down some that were set up decades ago, empty and others that held residual money that could be used elsewhere.

“Some of these were funds that were set up in the ’90s,” said Hill. “Some of them have no more money in them or there’s no future purpose for them and some of those need to be dissolved. There were some new ones that needed to be created for things like Measure Q, which recently passed.”

Following Hill’s presentation, councilmembers gave feedback and direction to help shape the final budget before it goes before the council in June. The officials discussed whether it should defer its community grants program to mid-year, and new, potential revenue sources. Scotts Valley Mayor Derek Timm pointed out that because much of the city’s income is reliant on fluctuating sales and property taxes, the city and council should look at ways to supplement the city budget, such as potentially increasing the rate of the utility user and transient occupancy taxes.

“We’ve talked about those things in the past and maybe when we reach mid-year, we’ll continue the discussion around what our needs are as a city or where we want to direct staff to go with future measures,” said Timm. “Because those can only be put on during election cycle years and so we have to think about that in advance. And I would recommend as a council that’s a priority going into this next budget cycle.”

To watch the meeting, visit scottsvalley.gov.