The Silicon Valley Voice

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How Santa Clara’s Budget Got a $42 Million Case of COVID-19

The City of Santa Clara faces a budget deficit that’s likely unprecedented in its history, driven by an unprecedented revenue shortfall, according to the City’s Finance Director Kenn Lee.

“All of the change is on the revenue side,” he said.

Even before the pandemic — in the original 2019/2020-2021/2022 budget — Santa Clara faced a $13 million deficit for 2020/21, according to Lee. In May 2020 revenue was projected to decline another $23 million, with the anticipation that the economy would open up in the summer.


When things got worse instead of better as the year progressed and hopes for re-opening dimmed, the deficit gained momentum and now is predicted to be nearly $42 million, driven by reduced revenues directly attributable to the pandemic.

The biggest culprit is an 88 percent decline in Santa Clara’s hotel tax — Transient Occupancy Tax, TOT — according to Lee. That’s about $9 million, down from about $23 million predicted for the current fiscal year (2020/21). Impact: $14 million.

To put that in perspective, Santa Clara will collect 30 percent less in hotel tax than it did in 1996, adjusted for inflation.

Sales tax also took a sizable hit, dropping to about $62 million from a forecast of $58 million.

While 40 percent of Santa Clara’s sales tax comes from technology business-to-business sales, the remaining 60 percent comes from retail and restaurant sales, which have been devastated by the pandemic. Sales tax from internet sales and takeout food don’t come close to closing the gap. Impact: $4 million.

Even property tax revenue — Santa Clara’s largest single revenue source — took a hit this year despite increasing real estate values. The decline is due to a change in the way the county calculates a complex school funding adjustment*. Impact: $3 million.  

Other significant revenue shortfalls include a $3 million drop in rent income as a result of the Related project delay. The City’s investments earned $4 million less as a result of near-zero federal interest rates. And with the cancellation of Parks and Recreation programs the City lost another nearly $3 million worth of fees. Impact: $10 million.

The forecast also includes some reductions in cost since the original 2021/22 forecast in made in June 2019.  Salary and pension costs are down $1.4 million, and there is also about $1 million in other adjustments that reduced spending for the coming year.

It’s important to understand that budgeting is an ongoing forecasting activity, said Lee. “Forecasting is our planning tool. We use it, given what we know today, to see what we have coming up.

“In our 10-year forecast we focus on the first two years,” he continued. “Even after the budget is approved we are constantly monitoring it every month.”

Santa Clara’s second largest budget deficit in the last 20 years was $9.3 million in 2004/05 — $12.5 million in 2021 dollars — when the local economy was slowly recovering from the dot-com bust and the September 11 attacks.

That represented 7 percent of the City’s general fund. The current deficit, largely the result of an economic depression caused by a public health catastrophe, represents 14 percent of the general fund.

You can find the annual budget and monthly City financial reports on the finance department’s page at


* Educational Revenue Augmentation Funds (ERAF), a property tax revenue shift enacted in the 1990s to compensate school districts for property taxes that were diverted from schools by redevelopment projects and their associated debt.


  1. Fajear 3 years ago

    It is about time we remove pension from government employees. It is a source of uncontrollable liability. Since the government employee salary is on par with public sectors and government jobs then to be more secure, there is no need to give pension to attract and retain people.

    • CSC 3 years ago

      Very true. Many decades ago the tradeoff was modest pay with a good pension and benefits plan. In recent years public employees keep screaming that they want the same pay as “Facebook interns” and also guaranteed life-time six figure “retirement” checks starting at age 50.

  2. CSC 3 years ago

    Step1 firefighters, on average, made $133,267 in 2019 including base pay, over time, and other pay in Santa Clara. Firefighter-II made $178,153. And don’t forget that they work a 48/96 Kelly Schedule which is 2 days on, 4 days off so they can just shift swap and never use vacation time which they cash in. This compensation is further padded by generous pension contributions that can allow them to retire at 50 with up to 90% of their highest pay.

    Same with a general Santa Clara cop, on average their base is $150,000 with over-time and other pay the average beat cop earns $195,613 before overly generous pension contributions.

    Both employment classifications have employment contracts guaranteeing them annual pay increases well over the inflation rate, nearly double digits! If the City of Santa Clara froze pay increases for 3-5 years it would be in a much better position to provide services to residents in a city that has an extremely low crime rate and rarely a fire emergency.

  3. KJ 3 years ago

    Couldn’t agree more with the comments here. While the city threatens service cuts, they ignore the real driver in increased costs over the years: super generous pension plans. Even just reducing some of the extravagances in the previous comment by CSC will result in substantial year over year savings.

  4. DD 3 years ago

    I don’t want cuts to the people that protect me.

    • Davy L. 3 years ago

      Your comment may be true; however, I’m certain you would also not be in favor of our city going bankrupt either. Our police and fire department workers are the highest paid amongst any of the local cities in the greater Bay Area. Obviously, I don’t believe the main reason behind this is that we have a much higher rate of crime or fire within our city. No, the reason is more than likely because the Police/Fire PAC in the past have always back certain City Council Members for their support. Now, however, since we shall no longer have city-wide elections, but rather City District Elections instead, the influence their PAC will be greatly reduced and diminished. At last, so much the better for all of us.

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