During the last city council meeting on March 25, held via teleconference, a preparation and financial recovery plan was presented by City Manager Andy Hall. The city expects a loss of $1.66 million in lost revenue due to the COVID-19 virus.
The city staff has reviewed the revenue sources and has created a new forecast for fiscal year (FY) 20 and 21. “To navigate the situation, the impact on our budget and [to] recover as quickly as possible…we know we have a reduction in revenue and fewer people are staying at hotels, some businesses are closed…make sure we take action to maintain a balanced budget,” Hall said.
Hall explained that the emergency financial policies will stay in effect until recovery markers are reached for two months in a row - which means specific revenue sources go back to pre-emergency. Areas that were looked at are: fees, fines, intergovernmental, other, taxes and transfers. “We went though every single revenue source and made determinations. The Port of San Diego is the largest producer of fees.”
Hall said that he discussed this with the port and for FY 20 the city expects to receive all maintenance agreement fees.
The General Fund Revenue projection from fees, excluding the Port of San Diego, will be reduced from the adopted municipal budget estimate of $318,350 to $238,762 or 75 precent of the adopted estimate in FY20, and from $312,930 to $234,698 in FY21. Revenue from the Port of San Diego will remain at $4,826,140 in FY20 and be calculated at 95 percent of the estimated revenue in FY21 reducing the projected revenue from $4,900,463 to $4,655,440. Therefore, the projections of General Fund Revenue from fees will be reduced to a total of $79,588 in FY20, and $323,255 in FY21.
Fines only account for 1 percent of the general fund. They are generated from parking and traffic violations and will not have an impact and staff does not recommend adjustments.
Intergovernmental revenue consists of reimbursements of the state for vehicle licensing fees, vehicle impound fees and other state mandated costs. Staff did not recommend adjustments because it is less than 1 percent of the general fund.
The “Other” category consist of business licenses, special event permits, and building permits. The projected loss in FY 20 is $167,8000 and $85,900 in FY 21.
Taxes include property taxes, sales, taxes, TOT franchise taxes and documentary transfer tax and the anticipated loss is projected at $485,600 in FY20 and $519,282 in FY21. The TOT will also see a reduction for the remainder of FY 20 and may carry over to FY 21. For FY21, TOT revenue has been reduced by 75 percent. Sales taxes are impacted because fewer people are shopping and there is also the impact of diminished gas usage from residents. The sales tax will be adjusted to a decrease of 20 percent for FY 20 and FY 21.
Transfers will not be affected because they are internal actions by the financial city staff. The transfer category provides funding to the General Fund and non-general fund department like the Sewer Fund. In summary the FY 20 revenue reductions is $732,988 and for FY 21 $928,437 for a total of $1,661,425.
The following Emergency Financial Policies will remain in place until recovery markers for all revenue sources are attained for two consecutive months:
• Temporary internal controls that limit spending by department heads and consolidate spending approvals to the management staff.
• Implementation of a “soft” hiring freeze to replace essential personnel positions only. All new hires must be approved by the City Manager.
• Implementation of a “soft” spending freeze on all non-essential purchases. All expenditures of more than $1,000 (even if budgeted) will require the approval of the department head and any expenditure of more than $5,000 (even if budgeted) will require the approval of the assistant city manager.
• All training and travel will be canceled.
• Presentation of budget adjustments and use of City resources to the City Council for consideration will be initiated by the information and proposals included in this report.
Other strategies will be actively explored and implemented as appropriate.
FY20/21 One-Time Expenditure Reallocation
Delay construction of the Skatepark - $700,000
Delay of Community Enhancement Project - $75,000 Use CDBG to complete Old Palm Crosswalks - $60,000 allocation from Economic Uncertainty Fund - $475,000 Federal, State and County Reimbursements - $50,000 Hiring and Spending Freeze - $300,000 For a total of $1,660,000.
If the virus outbreak continues to last, a contingency plan has been created:
Phase 1 is represented by this report and the policies included herein.
Phase 2 would increase the cost saving measures by considering:
- Additional allocation of Economic Uncertainty Funds of the General Fund
- Potential reductions in staff related expenses
- Elimination of all discretionary expenses
- Allocation of General Fund Reserves
Phase 3 would increase the cost saving measures by considering:
- Allocation of all available General Fund Reserves
- Employee concessions
- Reduction in workforce
Phase 4 would increase the cost saving measures by considering:
- Reductions in City services
- Restructuring of City personnel organization
During the council discussion Councilwoman Paloma Aguirre said, “I’m grateful we’re being proactive to keep the city viable…the sacrifices to delay the projects are really needed. These sacrifices will allow the city employees to stay. I hope we don’t have to enter phase 2 or 3.”
“Thankfully we went into this pretty strong…nothing I heard will break us if it stays to phase 1 or 2. It’s super important that when this is done we go back and look at youth programs and the skate park and make sure we take care of them,” said Councilman Robert Patton.
In other business:
The city council meetings will be held at 5 p.m. during COVID-19 emergency until further notice.
The consent calendar was approved unanimously. The only item was the state of local emergency relating to the cross border pollution from the Tijuana River.
The next city council meeting will be held by teleconference on April 1 at 5 p.m. and is available through streaming on the city website at www.imperialbeachca.gov.