Should another recession occur in the coming years, Santa Clarita is well-positioned to remain a strong economy, city officials said Tuesday during a study session in preparation for its 2020-21 spending plan.
The next recession is impossible to predict. But a recent recession probability model by the New York Fed, which City Manager Ken Striplin cited Tuesday, showed that the likelihood for a recession in the next 12 months was gradually increasing to levels seen before the last recession during the second and third quarters of 2019.
“With all that said, early conservative budget practices coupled with our healthy 20% operating reserve and AAA credit rating,” said Striplin, “are prime examples of how our organization is very well positioned for correction in the economy should that occur.”
His brief presentation to staff, the City Council, commissioners and members of the public at City Hall, was the first study session in a six-month process to lay the groundwork for the 2020-21 budget.
Santa Clarita’s strong, local economy is due to following a conservative budget process and practices, one that has “positioned the city to thrive for years to come,” said Striplin.
More closely, the number of jobs increased to 114,000 from 96,000 reported in 2016. The unemployment rate, as of December 2019, reached 3.7%, which dropped from 4% in 2018. Doing business in Santa Clarita is also improving as the number of businesses reached a high of 7,610 in the fourth quarter of 2018.
To improve or maintain its status in the coming years, Striplin emphasized the continuous following of the city’s budget philosophy: “The decisions made in good times are more important than the decisions made during bad times.”
This will be especially important for Santa Clarita as it prepares to address its top key issues, which Striplin identified to be public safety, homelessness, affordable housing and legislation that overrides local control.
Under affordable housing, for example, the city is keeping a close eye on legislation that could limit a city’s control over housing production. Senate Bill 50, a bill pushing for development near transit and job centers, failed in Sacramento last week but Mayor Cameron Smyth said he anticipates a version of SB 50 to pass this year.
If so, he added, the city will continue to “highlight and to demonstrate and put in place as many projects as we can that would be grandfathered out of any SB 50 (bills).”
While much planning is still underway, Striplin offered a look into preliminary revenues and expenditures for the new budget.
Revenues for 2020-21 would reach $114.1 million, which is the same as the 2019-20 budget. Sales tax — the city’s largest general fund revenue source — is also projected to be flat at $37 million. Expenditures, proposed at $113.8 million, increased from that of $113.6 million for the current budget. Public safety continues to remain the largest general fund budget item at $28.6 million.
The city is expected to meet at least four more times before a City Council hearing on the budget on June 9 at City Hall, followed by its adoption on June 23.