As I drove down Scotts Valley Drive last week, I smiled seeing all the happy faces of graduating high school seniors on banners lining the street. It’s that time of year when our community is filled with hope and excitement about what’s ahead. And just as these students are thinking about their futures, so too is our city.
May is when we roll up our sleeves and finalize the blueprint for how we’ll fund the services, projects and priorities that shape life in Scotts Valley. As the City Council prepares to adopt our Fiscal Year 2025-26 Budget, I want to give you an honest look at where we are—the progress we’ve made, the challenges we’re navigating and how we’re investing in a strong future for all of us.
One of the bright spots in this year’s budget is how much more we’re getting done with the team we’ve built. After years of staffing shortages, the City is now fully staffed—and you can feel the difference. Our Public Works team alone completed 11 capital projects last year and is actively managing two dozen more. They’re also helping us recover more of our costs internally—something we’ve rarely been in a position to do until now. That extra capacity is helping offset slower-than-expected sales tax revenue.
Sales tax makes up about 46% of our General Fund tax revenue—a big piece of our budget and also one of the most unpredictable. Thankfully, other revenue sources like hotel taxes, utility users tax and property tax are holding steady. Still, we’re taking a cautious approach, because our financial challenges are real.
This year’s budget totals $36.1 million in spending, with projected revenue at $30.9 million. That gap is covered by a mix of reserves and special revenue funds—including $1 million from our General Fund reserve. That will leave us with just 11% of our annual expenses in reserve, below our policy target of 17%. We’re expecting a $2.2 million reimbursement from the federal government for storm-related road repairs, but it may not arrive until late 2026. In the meantime, we’re working to elevate the urgency of that reimbursement for smaller cities like ours, where cash flow matters a lot more.
Part of what’s driving higher expenses is actually good news: we’ve been able to attract and retain top-tier talent across departments, thanks to competitive compensation agreements the City Council approved last year. These contracts brought our pay and benefits in line with the market, helping us fill vacancies and deliver services more reliably. But as expected, that success comes with higher labor costs—especially in public safety.
The Police Department represents about 23% of the city’s total expenses. With 28 full-time employees—nearly 43% of our entire workforce—our police team provides 24/7 service with the professionalism and care Scotts Valley expects. Every position counts in a small city like ours, and our investment in public safety reflects that commitment. While it might be tempting to compare us to other cities, the reality is that different staffing structures, service models and revenue sources make true comparisons tricky. What’s important is that we are delivering results with a team that’s working hard for this community.
Another area where we’re seeing long-overdue progress is in capital improvements. This year’s $9 million Capital Improvement Program is robust—and this time, we’re confident that much of it will actually be delivered. That includes street resurfacing, wastewater upgrades and major park projects like the new Skypark playground and the long-anticipated design finalization and bid process completion for Shugart Park. For the first time, we’ve used other revenue sources to tackle maintenance projects that have been deferred for years—allowing us to move forward without putting more strain on the General Fund.
I also want to thank our voters once again for supporting Measure X, which modernized our business license tax system. We’ve shifted from an outdated employee-count model to one based on gross receipts—a fairer and more sustainable way to support city services. In its first year, businesses are only paying 50% of the new rate. As part of the rollout, we’re also conducting a compliance review to identify businesses that may be missing licenses or need to update their records. We’re offering penalty waivers and making it easy to come into compliance—online, by phone or by mail. The goal isn’t to punish anyone—it’s to make sure everyone is contributing fairly.
Through all of this, one thing remains clear: Scotts Valley continues to do more with less. Our property tax share is among the lowest in the State, yet we deliver a high level of service, maintain a safe and welcoming community, and keep pushing forward with smart investments in infrastructure and quality of life.
As graduation caps go flying this month and we cheer on the next generation of leaders, I’m reminded of the responsibility we share to leave them a city that’s financially stable, resilient and ready for the future. That’s what this budget is all about.
To learn more, visit scottsvalley.gov/budget.
Derek Timm is mayor of Scotts Valley. To reach Timm, email dt***@**********ey.gov or call 831-239-9203.
