Santa Cruz taps social media, citizens to help fix city budget

A ballooning city budget deficit and a dwindling tax base led the City of Santa Cruz to rethink its governing methods. By using an Online collaboration tool, city officials tapped their electorate to help resolve a budget crises and set an economic development strategy that would preserve the city’s unique cultural and environmental hallmarks.

In the spring of 2009, California state legislators were facing a $26 billion budget gap – the worst such gap in the state’s history. Declining revenues forced the state to cut entitlement programs and promised aid to local municipalities. Very few county and city governments in California had the economic tools to withstand the kind burden being laid on them from the economy. The City of Santa Cruz was no different. For years leading up to the economic collapse, city officials struggled to deal with their own economic shortfalls, including a brain drain that took valuable jobs and a tax base to San Francisco or Silicone Valley.

To cover the $26 billion budget hole, the state of California proposed siphoning $2 billion in local property taxes, $1 billion of gasoline tax revenue meant for local governments and another $1 billion earmarked for redevelopment agencies. After the dust settled, though, the state took $2.1 billion in economic redevelopment funds promised to local governments, of which $3.7 million belonged to Santa Cruz.  The city was facing a $9.2 million deficit and at the same time, the city’s roughly 55,000 citizens were growing increasingly impatient with continued reductions in city services.

“We were doing everything just to keep the lights on,” Peter Koht, Economic Development Coordinator for the City of Santa Cruz, said last week during an interview at the Web 2.0 Expo in New York City. The city was understaffed, without a budget and needed help in properly conveying to residents the realities of the situation. “We had to reset expectations of what [city government] can and can’t do,” Koht said.

But the local media, also dealing with financial problems, were doing very little to provide meaningful information about how city officials were looking to fix their budget mess, Koht said. The city’s message was getting lost in the haze of failures in Sacramento. To help inform Santa Cruz residents and tap into community ideas on ways to manage the impending cuts, the city built Santa Cruz City Budget. Through the website, citizens could see visual representations of how proposed budgets would be spent and how cuts were translating into lost jobs. But more importantly, the website was interactive. It encouraged citizens to collaborate and participate through polls and comment sections, and it hosted a blog for the Mayor, “to stay on top of the news cycle,” Koht said.

With the help of UserVoice, a San Francisco-based company who helps structure and manage online feedback, the city set up the website within eight days, spearheaded by volunteers and with no budget. The UserVoice forum collected ideas, reduced redundancy and structured a ranking system so the best ideas on how to fix the budget bubbled to the top. This was important in getting more participants involved and keeping the outliers from controlling the debate, Koht said.

According to the city’s data, nearly 8 percent of the city’s residents registered at the budget website, suggesting ideas and voting on solutions. Because of the ID requirements, there was no anonymous hate speech. And by allowing official responses from city officials in the forum, irrelevant suggestions were largely avoided, while constructive debate and conversations began to pinpoint a few areas of greatest concern. “The level of engagement was inspiring,” Koht said.

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Another important aspect to the way Santa Cruz approached this project was releasing data on the city budget dating back ten years, along with comments from the independent city manager. Koht suggested this helped raise the dialogue to those who had a reason to be there. “We had CPAs and other experts from the private sector looking at our data, making suggestions about shared services, and redevelopment projects we had not previously considered.

“The energy was positive and solution oriented,” Koht said, “the community rallied around each other and the ranking system really helped us separate the wheat from the chaff.”

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The experiment was largely heralded as a success by “government 2.0” aficionados, and smarter government advocates. The technology used by Santa Cruz is spreading to other California cities for similar purposes. And the original WordPress plugin used to display the top suggestions on the city’s website is part of a broader open source strategy that will allow the technology to be shared with other municipalities. The city covered its deficit and showed its public how to constructively approach complex problems. But nearly 50 employees had to be cut, and another wave of pay cuts, pay freezes and furloughs have been doled out in response to the continued budget problems facing the state.

Koht says no one at city hall is thinking their financial issues have been solved, but the city is looking to move forward with an ambitious economic development scheme to keep local talent in the area, while pushing the notion of sustainability. They have initiated programs to make capital more accessible for small businesses by managing a micro-lending strategy. And the city is also looking to leverage partnerships with University of California Santa Cruz to create an ecosystem of support for start-up companies and high-tech internships.

“We run on social capital,” Koht said of the new Santa Cruz economy.

[pictures curtsey Peter Koht’s presentation at Web 2.0 Expo New York]