While a voter-approved utility users tax has brought in more revenue than anticipated, city officials are anticipating a shortfall of $1.6 million for the next fiscal year caused by businesses leaving town.
City Manager John Becker announced Thursday that the most recent and most detrimental loss for Newark is the planned departure of the Staples Fulfillment Warehouse located at 6601 Overlake Place.
“They do not employ a lot of people, but that closure will create a huge loss for the city,” Becker said. “We’re still getting a handle on what the complete impact will be, but it’s not going to be good for us.”
Becker announced Staples’ future closure at a special budget workshop held Thursday night. He told City Council that the news was “completely unexpected” and was brought forth to city staff on Jan. 16.
“It was strictly a business decision on their part, and, unfortunately, we are on the short end,” Becker said.
The shutdown of the warehouse, along with the soon departure of Target and the last year, total a $1.6 milion loss for Newark.
City officials said because of these business losses, they anticipate that Newark’s operational budget will be $31.9 million in 2012-13, compared with the forecasted operational budget of $33.5 million for 2011-12.
The current budget for 2011-12 is estimated at $33.2 million.
Still, officials told councilmembers that they are optimistic, partly due to the fact that Measure U – a 3.5 percent utility users tax that has restored numerous city services – has generated more funds than anticipated.
Officials said Measure U is expected to bring in approximately $3 million for fiscal year 2011-12, which is $700,000 more than expected.
But because of expected budget shortfalls, city staff may be asking councilmembers to consider not allocating a specific total toward its Fiscal Uncertainty Fund in future fiscal years, according to Susie Woodstock, administrative services director.
In May, City Council approved budget amendments that apportioned $250,000 toward the Fiscal Uncertainty Fund annually for the five-year duration of Measure U, in order to build it back up to $1.25 million. Since 2008, the city used $5 million from the Fiscal Uncertainty Fund.
Instead, city staff is proposing that at the end of each fiscal year, any extra revenue be transferred to the Fiscal Uncertainty Fund, and Becker said that is a positive for the city.
“The budget for the next two-year period looks positive. We’ll be able to build up our reserves,” Becker said. “We’re anticipating surpluses. … It’s really Measure U that’s really helping us.”
No action was made during the workshop and Becker said a document that will outline a complete five-year forecast will be presented to the council in April and that another budget work session is planned for May.