Fiscal Sustainability

As we experience the second 30-day period of the Shelter in Place order, the longer-term economic impacts of COVID-19 are revealing themselves to be quite severe and impactful to the local businesses, residents, and the resources that the City relies on to provide services to the community.

The City projects the financial impact from COVID-19 on the current budget to be $2.7 million for direct expenditures related to the public health crisis and loss of revenue - primarily from reduced sales and hotel taxes. This, combined with the mid-year budget shortfall that the City Council substantially resolved in February, means that the City is on track to experience more than a 10% reduction ($5+ million) in General Fund revenues this fiscal year (July 1, 2019 - June 30, 2020).

Measure G, the new 1/2 cent local sales tax, was estimated to generate $1 million between April 2020 - June 2020. As a result of COVID-19, expected revenue from the same period is now $150,000. Thankfully, this will not negatively impact the current budget because the City Council chose to wait until the revenue was received before deciding on its use.

Immediate deficit reduction strategies are being developed to resolve the projected shortfall related to COVID-19 in the current fiscal year. The City Manager's recommendation to resolve the deficit will be provided to the City Council on or before the third quarter financial update, scheduled to occur in May 2020.

In regard to the long-term fiscal challenges faced by the City, we cannot simply tax or cut our way to fiscal sustainability. Trimmings to the City's budget and hard decisions around which programs and services will continue must be made. New tax revenue streams will continue to be explored, however, our best strategy to return the City to a solid financial footing is growing the City's tax base with new and revitalized commercial and residential development. This is the principal driver behind the Transit Corridors Plan and the Bayhill Specific Plan - two efforts that are underway with proposed projects to come before the City Council for action this calendar year.