Coronavirus may cause a $90 million hit to Sacramento’s budget. How City Hall is responding
The coronavirus crisis could cause a $90 million hit in revenue to the city of Sacramento’s budget through June 2021, officials estimate, but the impact on residents and employees is still unclear.
With revenue from hotel taxes, parking meters and sales tax coming to a halt last month amid strict “stay at home” orders, city officials are projecting a drop of $30 million in revenue in the fiscal year that ends June 30, as well as another decrease of at least $60 million in the following year, City Manager Howard Chan told The Sacramento Bee.
City officials said they are confident the budget can absorb the massive revenue drop in the current fiscal year without widespread cuts to services. The city has a $33 million surplus in its general fund budget – the budget that supports most core city services – thanks largely to the Measure U sales tax voters approved in 2018.
The city also enacted a series of cost-saving measures in the early days of the coronavirus outbreak, including a freeze on the hiring of non-essential positions and canceling staff travel. City officials said they are also evaluating whether to suspend some planned capital improvement projects.
“(We’re doing) all the things you need to do to preserve cash, because we just don’t know,” Chan said. “We don’t know what this is going to look like long term.”
Mayor Darrell Steinberg said he believes two big factors will allow the city to weather the storm: Measure U sales tax revenue and a federal stimulus check.
“That second half cent (Measure U) is going to save the city from deep cuts to public safety and other essential services,” Steinberg said. “Ultimately the economy will recover and we’ll be able to eventually redirect that second half cent back to economic opportunities to our communities.”
Steinberg championed Measure U as a vehicle to invest in disadvantaged neighborhoods. However, revenue from the measure can be used for any general fund purpose.
Keeping the promise to voters – to use the money to help underserved neighborhoods – is still the mayor’s top concern, he said. That’s where the stimulus comes in.
“Where one source temporarily recedes, another emerges,” Steinberg said.
Coronavirus stimulus could help Sacramento
According to the latest estimate from the state Legislative Analyst’s Office, the city is slated to receive $88.9 million from the federal Coronavirus Relief Fund. Stimulus money will be available to localities of more than 500,000 people; Sacramento’s population is estimated at 508,000.
Steinberg said he wants to use the stimulus money to help address the city’s housing crisis; redevelop commercial corridors; help fund the Aggie Square project at UC Davis Medical Center; fund tourism initiatives; support the city’s growing creative economy of artists; and support workforce development training for recent college graduates and adults. He’d also like to see it fund some of the inclusive economic development projects that have been submitted to a city portal, he said.
Federal government officials have said the stimulus money cannot be used to fill budget holes, but have not yet said if it can be used for the types of projects the mayor is proposing. The city expects to receive more direction by April 24, city spokesman Tim Swanson said.
The projects would also need City Council approval, Steinberg said. The city expects to receive the stimulus money within 30 days and must spend it by Dec. 31.
The city has roughly $33 million in surplus money called “one-time resources” that it was expecting to have on hand at the end of June, according to the midyear budget forecast.
Steinberg said that money is only available because Measure U passed. If the city used it to fill the $30 million loss this year, Steinberg said some would still be left over to help address the $60 million loss expected next fiscal year, due to the cost-saving measures that started last month.
While other cities such as San Francisco and San Jose have pushed back their budget process, Chan still plans to submit his proposed balanced budget by the May 1 deadline required in the city charter. The council is expected to approve the spending plan by mid-June, Chan said. Unlike last year, the first year with Measure U sales tax revenue, the new budget will not include new programs, services or employees.
“There’s not going to be a lot of fanfare,” Chan said.
The virus also caused city officials to hold off on issuing a planned 30-year bond, which would have required the city to make a payment of $7.5 million in Measure U revenue right away to receive $125 million to be used for affordable housing, city facilities and economic development.
Steinberg said he still wants the city to move forward with the bonding plan, even if it’s delayed.
“I think we can find $7.5 million a year by being smart about how we go forward with our city budget,” Steinberg said.
A report from a consulting firm released last month suggested a long list of ways the city could save millions, including cutting down on police and fire overtime, changing its business operations tax and reducing the number of take home vehicles. Officials might consider the ideas in that report to help offset the revenue loss, Swanson said.
The city also has about $55 million in a separate rainy day fund called the “economic uncertainty reserve,” which it does not plan to tap into to fill the revenue loss created by the virus.
“There’s a difference between a rainy day and a snowstorm,” Steinberg said.
More federal stimulus money could be on the way, as well as FEMA money, Chan said.
Before the virus hit, city officials projected the city’s rising pension payments and other long-term obligations could cause a $21 million deficit in fiscal year 2021-22, rising to $27 million in fiscal year 2022-23. Officials have not yet released new projections for those years.
This story was originally published April 15, 2020 at 3:46 PM.
