Financial contraction for the city’s government does not appear to have been as severe as anticipated, based on updated numbers on the close of the 2019-20 fiscal year that the City Council reviewed on Tuesday.
To be sure, the city did experience revenue loss late in the period as a result of the coronavirus pandemic, which planners and the council adjusted for in the spring. However, the final numbers seem poised to land somewhere between those in the original budget and the revised projections that officials made after the pandemic shut down large parts of the economy.
“It is looking rosier than we anticipated,” City Manager Yasmin Beers told the council on Tuesday. “It is looking much better, and my hat’s off to our team as well as our consultants who really worked hard to have the appropriate assumptions, thankfully, in place.”
Preliminary numbers for revenue show around $228.9 million in income, less than the initially projected $236 million but an improvement over the adjusted expectation of $225.5 million. Property tax revenue actually exceeded all projections by more than $1 million, as did charges for services, such as Scholl Canyon Landfill fees and emergency response fees, which are bolstered by Medi-Cal payments.
“Our sales tax numbers did a lot better than we anticipated once we did that revision in May,” Finance Director Michele Flynn added. “A lot of that is due to online sales. The sales tax that we receive through the online sales that are happening is making up for some of the losses that we’re experiencing in the retail and restaurant sectors. This does include sales like on Amazon, Etsy and other online options.
“Overall, a very good picture for our revenues,” she added.
On the expense side, preliminary numbers show that the General Fund expenditures were around $230.4 million for the year, a sum that is below the initially planned $237 million and well below the adjusted $242.4 million, a figure that reflected anticipated pandemic-related costs.
All of this was in spite of overtime pay that vastly exceeded projections for the year, although Flynn noted that it was roughly in line with the prior year’s costs for overtime. Chiefly, regular salaries and hourly wages, along with benefits, helped to reel in the expenses.
“The hiring freeze that we implemented due to COVID, you can see the savings come through in our salary number,” Flynn explained. “Closures of our facilities [have] the direct result of the hourly wages looking lower as well as our utilities being a little bit lower than projected.”
The hiring freeze likely creates a straight line to the bloated overtime numbers, particularly in the police and fire departments, where shifts are almost always fully staffed in the event of vacancies or absences.
“All of our departments have come in under budget,” Flynn added, “so they have done a fantastic job managing their expenditures for the year and holding to the hiring freeze that was implemented and dealing with those vacancies, which is not always easy.”
All in all, factoring in transfers and economic development funds, the city is looking at a net loss of $1.715 million for the year, a significantly better prospect than the once-projected $6.519 million shortfall. The loss is, as always, covered by reserve fund balances.
Moving forward, no adjustments have yet been suggested for the current fiscal year, for want of more data. However, preliminarily, departments have identified a possible $1.7 million in savings for the current year, include $616,000 in salaries and benefits, $879,000 in contracts and $188,000 in travel and training. Those possible salaries savings are on top of the $5 million reduction on account of the hiring freeze, Flynn added.
“There may be other reductions that are possible in terms of the departments not being able to get to certain projects,” Beers said.
Council members were, of course, happy for any good news, even if it comes as a bit of a silver lining for Beers’ upcoming retirement and departure from city government in October.
“I believe that this may be the best going-away gift for Ms. Beers, and that’s a vindication of her urging council to stay the course, stay calm, don’t panic,” Councilman Ara Najarian said. “Remember in May and June we were talking about furloughs and cutting back, and she said, ‘Hold the line, let’s see how it turns out. We have our hiring freeze, that’s going to slowly reduce our expenses,’ and this is how it turned out, which is very good. This is almost just a blip on our budget projections.”
Replied Beers: “Staying the course and being measured, I think, is always helpful, and time in this case has been on our side.”