SAN LEANDRO CITY COUNCIL | The uncertain economic times of year’s past appear in the rearviewmirror in San Leandro. “Things are on a significant uptick in San Leandro,” said City Manager Chris Zapata during a budget work session Monday night. The city’s proposed two-year budget estimates a $6 million surplus during the next fiscal year beginning in July and another $4.3 million in 2016-17.

The expected higher revenues, which top $95 million next fiscal year, are bolstered by the half-cent sales tax increase passed by San Leandro voters last November. Measure HH, builds upon the previous quarter-cent sales measure, approved in 2010, that many in the San Leandro say kept the city financially afloat during the Great Recession.

The sales tax bump is expected add up to $10 million in new revenue, said Finance Director David Baum, however, San Leandro will not see the full benefit of the windfall until next year, he added, because the new sales tax revenue is not allocated by the state to the city until next month.

Nonetheless, San Leandro’s increasingly positive economic situation is being fueled by the additional sales tax, much of it derived from big-ticket items at some of the San Leandro’s big box retailers like Costco and Home Depot, in addition, to new car purchases. Forty percent of San Leandro’s estimated revenue is derived from the sales tax, said Baum.

In addition, said Baum, there other positives contained in the city’s economic outlook. Unemployment dipped below six percent after topping over nine percent in 2012. Median home prices are up 10 percent to over $450,000 and the city’s credit rating was bumped from A+ to AA-, the first increase in 15 years, and one of the highest in the state, said Baum.

While the additional revenue can help San Leandro replace and build upon years of cuts to staff and infrastructure, Zapata warned the slowly booming state and national economy could bust, therefore, making the city’s reliance on sales tax receipts problematic in a poor economy.

“It’s is extremely important that you understand this is a good thing, but could be a bad thing in a volatile economy.” said Zapata. “History does repeat itself and the economy can take a swoon.” The impetus for some of the large tax receipts from items like automobiles and home improvements, added Baum, is the prevalence of low interest rates. Talk of the U.S. Treasury Department raising rates from zero in the near future could temper some of those purchases and somewhat lower the city’s sales tax revenue, said Baum.

Now that the San Leandro City Council has some money to play with, the question becomes how will spread it around a city most regional observers believe is on the upswing after investments in a downtown fiber-optics loop has attracting data and tech-based manufacturing to the city.

The general consensus of the City Council Monday night suggests a desire to shift some of the additional revenues toward paying down San Leandro’s overall unfunded liabilities, which total $157.8 million and represent $11.1 million for the 2015-16 fiscal year.

Councilmember Jim Prola said in a interview, the city has the opportunity to pay more than the full amount on unfunded liabilities. “That has to be a high-priority,” he said. Mayor Pauline Cutter agreed. Making just the requirement payment isn’t sufficient, said Cutter. “[The balance is] not going down and might not even go down if we pay our full share.” Councilmember Corina Lopez also advocated for excess revenue be shifted to paying down pension and other retirement costs, in addition, to investment in promoting the city’s burgeoning business scene.

The suggestion to lessen the financial stress of employee benefit costs with increased revenues might be music to the ears to San Leandro’s public employee groups, all of which begin labor negotiations with the city this year.