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 Belt Tightening
City forecasts revenue loss of $5.5 million for next fiscal year.

Tom McGreal | Stratford Court

The City held a Budget Workshop on May 16th to determine the impact of COVID-19 on City finances in Fiscal Year 2021, which begins July 1, 2020. The workshop focused on forecasting the potential impact on revenues, reaching agreement on what essential government services entail, identifying essential Capital projects and Special projects and providing feedback to the City staff on the use of the General Fund Reserves.

The City Council reviewed several revenue scenarios that projected differing levels and timing of economic recovery for the Fairgrounds, hotels, restaurants and retail businesses. These businesses directly impact the amount of Sales Tax collected, and the hotels operations determine the amount of Transient Occupancy Tax (TOT). As noted in the Staff Report the TOT represents 17% of City revenues, and Sales Tax represents 13%. Although the Governor has begun to reopen certain types of businesses, the Finance Committee and the City Council recommended taking a conservative outlook for the economic recovery that resulted in a projected revenue loss of $5.5 million for the fiscal year beginning on July 1, 2020. This includes a loss of $4 million in General Fund revenues (or 22% of the adopted budget) and $1.5 million in Measure Q revenues (or roughly 50% of budgeted Measure Q revenues).

The Workshop also defined three tiers of governmental services including Essential services (those legally required and critical to public health and safety), important services to operations and community values, and non-essential services (those that could be deferred). This was a good discussion that will provide guidance to the City Manager in developing a revised spending plan for fiscal year 2021.

Council also reviewed a list of Capital projects and Special projects to identify which must be completed in fiscal year 2021 and which projects can be deferred. The result is a limited list of essential projects that must also be included in the revised spending plan for the coming year. Council decided to place the Measure Q projects (undergrounding and Shores Park development) temporarily on hold.

Finally, Council reviewed the General Fund reserves, which are projected to total approximately $5 million as of June 30. 2020. This resulted in a prioritization of the reserve accounts that identifies which reserves might be used in the event of a budget deficit. Council noted that the Finance Committee met on May 12th and recommended that the City adopt an approach that protects the General Fund reserves at the current levels to ensure that the City has the needed financial resilience in the event that the COVID-19 crisis has a slower recovery time frame.
The City staff is now finalizing a revised spending plan for fiscal 2021 based upon this new revenue forecast and City Council direction from the Workshop. The next step takes place on June 9th when the staff presents the revised budget to the Finance Committee followed by the review and adoption of a new fiscal 2021 budget at the June 16th City Council meeting.




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