Steve Clark, right, and Krista Jett joined the Scotts Valley City Council after the November 2024 election. (Marcello Hutchinson-Trujillo — Santa Cruz Local file)

The budget is also strained by “sluggish revenue” and higher wages for city staff, Scotts Valley City Manager Mali LaGoe wrote. The city’s financial outlook “remains cautious,” LaGoe wrote. State budget cuts could mean less grant money for city projects, she wrote.

The proposed budget also includes:

• Design changes on Mount Hermon Road and Scotts Valley Drive for safer walking and biking.
• Elimination of a $50,000 community grant program. The money is usually distributed each year to nonprofits and other groups.

A major goal for the city is to speed redevelopment of the Town Center with added housing. The coming fiscal year starting July 1 “will be the year it all comes together” through an agreement with a to-be-determined private developer, LaGoe wrote.

Scotts Valley voters last year approved Measure X, which is set to increase business license fees starting July 1. City staff estimated that it would bring in an extra $750,000 annually. But until July 1, 2026, businesses will only pay half of the new, higher fee, bringing in an estimated $300,000.

Measure X’s actual impact on city finances won’t be clear until the next budget mid-year review in early 2026, according to a city staff report.

Over the next decade, the city is expected to spend more than it raises by $500,000 to $1 million annually. 

In the report, staff recommend that the city council consider placing a measure on the 2026 ballot that would raise the city’s hotel tax. 

The Scotts Valley City Council is expected to consider final approval of the city budget at a June 4 meeting.

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