According to a story in the Chronicle and a recently released report from the City looking three years ahead we're facing increasing city deficits assuming nothing is done.
Next year's projected deficit is $438 million, which is higher than budget analysts had projected. Newsom said that with midyear cuts made to balance the current fiscal year budget of $6.5 billion, he'd hoped to see next year's deficit fall below $400 million. But those midyear cuts, which were supposed to save the city $115 million next year, will save about $87 million.
The Chronicle report goes on to say that the cause is largely because "the city continues to struggle through an economic recession that has gutted revenue from property taxes and other sources".
But it turns out that the City's report shows that tax revenues are actually projected to increase over the next three years, including property tax revenues. The only major source of tax revenue for the City projected to be down is the real estate transfer tax (down $31 million). Overall, the City is projecting total revenues will reach over $3 billion in 2010-11 up from this year's (2007-8) revenues of $2.8 billion.
Next year's projected deficit is $438 million, which is higher than budget analysts had projected. Newsom said that with midyear cuts made to balance the current fiscal year budget of $6.5 billion, he'd hoped to see next year's deficit fall below $400 million. But those midyear cuts, which were supposed to save the city $115 million next year, will save about $87 million.
The Chronicle report goes on to say that the cause is largely because "the city continues to struggle through an economic recession that has gutted revenue from property taxes and other sources".
But it turns out that the City's report shows that tax revenues are actually projected to increase over the next three years, including property tax revenues. The only major source of tax revenue for the City projected to be down is the real estate transfer tax (down $31 million). Overall, the City is projecting total revenues will reach over $3 billion in 2010-11 up from this year's (2007-8) revenues of $2.8 billion.
So it's clearly incorrect to attribute the projected budget deficits to "gutted revenue from property taxes". The real culprit is alluded to by the Major who is quoted as saying that property tax revenues are only going to grow at 1% per year compared to previous years when they grew at more than 10% per year.
The conclusion has to be that we've built a budget based on obviously unsustainable growth in property taxes and other sources and we've committed to costs that continue to grow at a rate that outstrips our slower growing revenue. Although clearly an oversimplification, in theory it ought to be possible to continue providing the same level of service as today by simply freezing all of our costs at current levels.
In the current economic environment, I suspect that most cities would be thrilled to have the problem of revenues increasing "only" 1%.
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