Saratoga’s economy bounces back from pandemic, but major budget deficit still looms

The City of Saratoga’s local economy bounced back from the pandemic last fiscal year, but a potential budget deficit could still be growing.

Staff said Saratoga’s revenue sources were nearly 8% higher than anticipated for fiscal year 2022-23, and its expenditures came in 2% under budget. Higher than expected revenue from property taxes along with a boost in charges for services caused the increase.

“Overall, the fiscal year ended on a positive note, and we expect that to continue,” said administrative services director Nick Pegueros at the July 19 council meeting.

Sales and hotel tax revenues saw a 4.9% increase, bringing in an additional $120,000, and charges for services like construction fees brought in 37.6% more revenue than budgeted, or $1.05 million.

“Saratoga has experienced an extremely robust recovery from the impacts of the pandemic, and 2022-23 has the highest sales tax collections in the past 15 years and likely longer,” according to the staff report.

Property taxes, the city’s largest and most stable source of revenue, brought in an extra $290,000. These taxes make up 66.8% of the budgeted revenue.

Pegueros attributed the higher revenues and lower expenditures to Saratoga’s conservative budgeting strategy.

While revenues were higher than expected, the city still had to pull $450,000 from its unassigned funds to balance the budget amid changes to the annual revenue collected from the West Valley Solid Waste Management Authority.

A recent court case, Zolly v. the City of Oakland, challenged the franchise fees that Oakland charges certain waste hauling companies. Staff said that precedent will likely cause a loss of $1.3 million in annual revenue from Saratoga’s solid waste franchise fees by fiscal year 2024-25.

Staff estimated earlier this year that the town could face a $4.8 million budget deficit by 2026 because of this change. The city council is set to hear an update on the state of the budget deficit later this year.