After Years of Struggles, Santa Cruz Shows a 2 Percent Budget Surplus for 2012

While cities across California are declaring bankruptcy and the state is $15.7 billion in the hole, Santa Cruz  is about to show a $1.2 million surplus, or roughly 2 percent of its annual spending.

"We are currently experiencing a slight recovery from the Great Recession," wrote City Manager Martin Bernal in his annual report, which starts the new budget sessions. "There are signs of improvements in our local economy, particularly in our retail and tourist industries."

Bernal wasn't sure when the last time the city showed a surplus, but things have been tight since he took the job in 2010 with a projected $8 million shortfall.

Thanks to recent 10 percent cuts to city employee salaries and the loss of 100 jobs, the city managed to stay afloat and save about $5 million a year of its $234 million budget, said Bernal. It also made employees take furlough days, which cut their weekly pay to 36 hours and which will end with this calendar year.

'The bad news is that it didn't come from the revenue side," said Bernal. "We haven't found ways to take in more revenue, but we have done it through cuts."

The city council will start the budget process June 5 and 6 with day-long hearings about where it should spend its money. Then, the council approves the projected budget July 10. The city manager's proposed budget was posted here Thursday night.

Unfortunately, it doesn't look as bright as the one that just ended, said Bernal, because it projects a $3 million deficit, $1 million of which is a loss of a federal grant that supported police and fire departments, which now make up more than 50 percent of the city's expenditures. The rest will come from pledged costs of road improvements as part of the 2006 Measure H.

Mayor Don Lane was exhuberant about the completed 2012 budget Thursday at a public forum which drew only four members of the public this year, after filling the police department's conference room with 40 people last year. Don't worry. If you missed what was truly an enlightening overview, it will be broadcast on Community Television of Santa Cruz County, CTV.

"My favorite part is how successful the city has been in restraining expenditures," said Lane. "We held on tight and weathered the bumpy ride."

Bernal said he considered the surplus a modest, but hopeful sign. He said he expected revenues to pick up from hotel construction, including the new Paradox Hotel at the site of the University Inn on Ocean Street, which will have 120 rooms and 1,200 square feet of conference space.

He also looks forward to the opening of Forever 21, the clothing retailer that will take over the Borders building on Pacific Avenue and the new Marine Sanctuary Exhibit, which opens this summer and is projected to draw as many as 250,000 tourists a year.