By Steven Tavares

San Leandro’s climb back to financial stability, these days, is measured in hope as much as it is in dollars and cents. The city’s new finance director brought a glimmer of cautious cheer to the city’s outlook. Conservative budget projections and fortuitous injections of better than expected tax revenues will significantly lower a budget shortfall once predicted to be as high as $7.3 million last June to around $2.2 million for the end of 2010, according to Finance Director Tracy Vesely.

“We’re ending the year better than we thought,” she told the three-person Finance Committee Tuesday afternoon. “It’s a little early, but we’re not seeing a trend of over-expenditures in the near future.”

Two recent developments buoyed some hope that the city’s finances are, at the very least, holding steady rather than continuing its precipitous slide during the past three years. The State Board of Equalization notified the city of a larger-than-expected amount of sales tax receipts totalling $1.7 million, said Vesely. Commerce in San Leandro has not ramped up over the past year. It is still flat, but Vesely said the city overpaid in 2007-08 and the state recouped the difference last year. She says the city also projected low in its last budget.

Vesely also reported hopeful news regarding the city’s first installment of property tax revenue from the state. She expects $400,000 more than expected. She was encouraged by the figures since around 47 percent of the total property tax receipts come in the first outlay, but she also predicted flat revenues for the next fiscal year. Between the two small injections of revenue, Vesely projects a net increase of $1.7 million. The ending budget figures do not include a $5 million emergency fund, potential Measure Z sales tax revenue starting next April or the one-time $3.1 million payment from Kaiser for road improvements surrounding its future medical center in the city.

Tony Santos in his last official meeting as mayor used the news to portray his administration as leaving the city in better financial health than many of his critics expected. “The city faces a much brighter picture than imagined in June of this year,” said Santos. “The city will definitely be frugal over the next 18 months, and we can thank our employees for extending their contracts over the next two years without any increase in salary.

Councilwoman Diana Souza, who also sits on the committee with Councilman Jim Prola, said she is still uncomfortable with the city’s still precariously low reserves. “We can’t continue like that,” said Souza.

San Leandro’s investment report also took a beating in the second half of 2010. Its $91 million portfolio plummeted to $78 million at the end of last September. According to staff, the city’s asset management company has floated a plan to increase corporate investments in the fund. Corporate investment has been anathema to the city’s conservative fiscal policy in recent years and comments made Tuesday indicated it is something the city would listen to, but a financial plan it would likely not follow.

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