SCOTTS VALLEY >> As Scotts Valley recovers from the economic impacts of the pandemic, Scotts Valley residents can expect some restored city services and staff, as well as progress on city-sponsored construction projects for the fiscal year that begins July 1.

“We’re not there yet — we won’t be there for a few years — but it is a real opportunity in this budget to rebuild our services and bring back more to the community,” City Manager Tina Friend said at a city council meeting Wednesday.

The budget is still a draft. The Scotts Valley City Council is set to discuss it again at its June 2 meeting. City staff and a consultant gave a presentation of the draft budget to the city council during a three-and-a-half hour meeting Wednesday. Council members said they would hold their feedback until the June 2 meeting. 

The Scotts Valley City Council reviewed a draft city budget Wednesday. (Zoom screenshot)

Upcoming decisions

The council is expected to make policy and funding decisions on several projects including:

  • Pension obligation bonds: In recent months, the council and staff have considered whether to pursue pension obligation bonds to help pay the city’s roughly $19.8 million in unfunded pension debt. Pension obligation bonds are bonds that local governments issue when interest rates are low to help pay off unfunded pension liabilities. The bonds could save Scotts Valley up to $354,000 per year, city leaders said. However, many experts consider those bonds risky because if the market crashes, the city’s debt grows. The window to pursue these bonds may close within the next year if interest rates rise. Other local jurisdictions have begun to consider these bonds as well, including the Santa Cruz County Board of Supervisors and the Santa Cruz METRO transit district.
  • Inclusionary affordable housing rules: Scotts Valley mandates that new housing projects of six or more units must dedicate 15% of those units at affordable prices or rents to qualifying households that have lower incomes. The prices and income criteria are based on the county’s area median income. Many California cities have similar rules, called “inclusionary housing” laws.  Scotts Valley’s inclusionary law only applies to part of the city. A majority of the council has said that they would support an expansion of the law to apply to the entire city and in recent months directed the city staff to look into it. Wednesday, City Manager Tina Friend expressed concern that city staff did not have the capacity to carry out the work without $60,000 of consultant help, which is not in the draft budget. The council will have to decide whether to fund a consultant in the next year.
  • General Fund loan repayment: The city has a roughly $3.3 million loan from its General Fund to the city’s former redevelopment agency. It’s one-time money that’s expected to be fully repaid in the next few years. City Manager Tina Friend has recommended that the city use part of that money to replace the city’s public works building, an expected cost of about $800,000.

Draft budget highlights

The draft budget calls for a:

  • Possible 9% increase of wastewater rates for Scotts Valley customers.
  • Restoration of eight vacant positions and the addition of four new positions, including a school resource officer and an assistant to the city manager. Two of the filled vacant positions would be in the recreation department.
  • Projected General Fund revenue of about $14 million, up from roughly $13.7 million in the 2020-21 fiscal year. Projected General Fund expenses are $13.7 million, up from $12.5 million the prior year.
  • Roughly $977,000 General Fund deficit. To balance that deficit, the city would have to draw reserves down to about $4.4 million by the end of the fiscal year.
  • Transfer of roughly $541,000 from the General Fund to the city’s Recreation Fund to cover a deficit. Most of the recreation staff was laid off during the pandemic, and only $13,200 of recreation revenue is expected for the fiscal year that ends June 30. The Recreation Fund had an average $1 million annual revenue for the fiscal years 2016 to 2019.

Scotts Valley’s Recreation Fund is independent from the General Fund and relies on income from recreation fees. The Recreation Fund had a sharp decline in revenue during the pandemic and is not expected to fully recover for a few years. (City of Scotts Valley)

The draft budget also calls for $6.9 million for major capital planning and projects. The city would have to hire consultants to carry out the work.

Those projects include:

  • Completion of the Scotts Valley Branch Library renovations, funded by Measure S, a property tax approved by Santa Cruz County voters in 2016 for library upgrades. ($2.7 million)
  • Upgrades to the city’s wastewater treatment plant (about $1.2 million)
  • Pavement improvements to Bean Creek Road, between Montevalle and city limits (about $1 million)

Wednesday, several residents spoke during public comment. Some called for the council to include pedestrian and bike safety improvements to Bluebonnet Lane.

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Kara Meyberg Guzman is the CEO and co-founder of Santa Cruz Local. ​Prior to Santa Cruz Local, she served as the Santa Cruz Sentinel’s managing editor. She has a biology degree from Stanford University and lives in Santa Cruz.