Coronavirus is wreaking havoc on Sacramento area budgets. See how your community stands

Delayed payments to pension plans. Depleted rainy day funds. And a whole lot of uncertainty about what the future has in store.

Local governments across the Sacramento region are scraping old budgets and crafting new ones, as the widening coronavirus pandemic eats into tax revenue, delays major projects and wreaks havoc on the local economy.

The unanimous sentiment among city managers and chief financial officers in Northern California? An unprecedented sense of uncertainty about what the next few months, and potentially years, might bring for local governments big and small.

Stay-at-home orders have left local businesses scrambling. Local restaurants have shuttered dining rooms. Major shopping centers are deserted. Canceled conferences, concerts and sporting events have left hotels and motels practically empty. Unemployment has skyrocketed.

California cities forecast a nearly $7 billion general revenue shortfall over the next two fiscal years, according to an analysis by the League of California Cities, threatening fundamental services like public safety, fire service, parks and recreation, and more.

After years of steady population and economic growth, cities and counties across the state are seeing sales and hotel tax money dry up, forcing them to make cuts, lay off staff and potentially dip into their reserves.

City managers and chief finance officers in the Sacramento region’s major cities and suburbs say they won’t be able to have a clear picture of the economic impacts until September or October at the earliest, when cities and counties typically update and approve final budgets

Some likened the ongoing situation to a never-ending emergency, with no recovery period in sight. The Great Recession was devastating to local governments, officials say, but that was a slow descent. This is “like falling off a cliff,” said Rocklin City Manager Steven Rudolph.

“It doesn’t even make sense to peg a number to next year because it’s so dependent on what happens next,” said Roseville’s chief financial officer Dennis Kauffman.

Here are the best estimates for how your community will be impacted by the coronavirus pandemic.

City of Sacramento

The city of Sacramento could see revenue dropping $33 million below initial estimates by the end of the fiscal year, city manager Howard Chan previously told The Bee. It would be even worse next year — another $59 million decrease.

City officials said they’re confident the budget can absorb the massive decrease in revenue this year without major cuts to service. That’s because the city has $33 million in money left over from this budget year to fall back on and took early measures such as a hiring and travel freeze.

“(We’re doing) all the things you need to do to preserve cash, because we just don’t know,” Chan previously told The Bee. “We don’t know what this is going to look like long term.”

Sacramento, because its population is over 500,000, was the only city in the region to receive stimulus money from the federal Coronavirus Relief Fund.

Federal officials have said the money can’t be used to fill budget holes, and Mayor Darrell Steinberg has spoken about a broad range of ways to spend the money. That would include addressing the local housing crisis, funding tourism initiatives, supporting workforce development training and more. Chan said he needs more clarification from the federal government on how the money can be used.

The city also has about $55 million in a separate rainy day fund that it doesn’t plan on dipping into. “There’s a difference between a rainy day and a snowstorm,” Steinberg previously told The Bee.

Roseville

Roseville is particularly reliant on tax revenue from its flagship retail centers, the Westfield Galleria mall and the Roseville Automall. Combined, they generate about $15 million in sales tax revenue every year, not including money from a new half-cent sales tax.

The city could see a sales tax shortfall of about $4 million to $8 million this fiscal year, about 5 to 10 percent less than the $75 million Roseville hoped to rake in, according to the city’s chief financial officer Dennis Kauffman.

The future of those two shopping districts may be emblematic of the city’s financial fate.

“Nobody knows when will stores open up,” Kauffman said. And when they do, “will people go shopping?”

In late March, almost immediately after Gov. Gavin Newsom issued a statewide stay-at-home order, the suburb laid off 620 temporary, seasonal and part-time employees — people working at the libraries or teaching exercise classes as part of the parks and recreation department.

A half-cent sales tax the city approved in 2018 allowed Roseville to put some money away in a $16 million reserve fund “that has really been a lifesaver for us,” Kauffman said. “Had we not had that reserve, we would’ve been looking at cuts now, weeks ago.”

Roseville had intended to make “significant payments” to its pension liability and “we were looking forward to doing that in the next few years,” Kaufmann said. The city will likely have to put aside those goals for a few more years.

Lincoln

The city had anticipated seeing about $4 million in sales tax revenue this year. City manager Jennifer Hanson said she expects to see a $500,000 shortfall this year, and sales tax revenue plunging to $3.4 million next year — and that’s under the assumption that restrictions start to lift in May.

Lincoln is more reliant on property taxes, which generate about $7.4 million for the city, Hanson said. Because of that, “we’re going to weather this current situation just fine,” she said. But extended restrictions or a second wave of coronavirus cases could have a “significant impact.”

“We don’t have a whole lot of areas to cut because we’re already so lean,” she said.

The city has temporarily furloughed staff members in the recreation and library departments since those facilities have been ordered to close. Hanson said she doesn’t anticipate having to lay off staffers.

On May 5, city staff will propose an “extremely conservative” budget for the City Council, she said, reducing non-essential projects and tightening up capital expenditures.

Generally cities have multiple types of reserve funds for when revenue starts to dry up. Lincoln has an operating reserve of about $4.6 million that “we’re not projecting to touch” next year, Hanson said.

But the city had previously loaned out its catastrophic and economic reserve fund — which totalled about $4.9 million — to the airport, an interfund loan that was slammed by a state audit last year. The airport is still paying that fund back, which means money that will be out of reach for the city if things get especially dire.

Rocklin

The city is expecting a shortfall in sales tax money this year of about $1 million to $1.5 million, “a pretty hefty reduction for one quarter” considering the city had expected about $15 million, said city manager Rudolph.

The decline in sales tax revenue could get even bigger next year, up to $2 million, Rudolph anticipates. But he said because Rocklin is not overly dependent on sales tax or hotel tax money, the city should be “able to weather this storm.”

“I don’t think it’ll be necessarily comfortable,” he said.

The city has frozen hiring, eliminated non-mandatory training and travel expenses, and halted capital purchases like replacing a portion of the city vehicle fleet, Rudolph said. The city has about $16 million in reserve funding.

“Those cuts will enable us to get through the year without having to look at other sources,” he said. “If it becomes more dramatic, we will have to look for other potential cost-saving” measures.

The timing couldn’t be worse for the city’s flagship downtown project Quarry Park Adventure, where Rocklin has invested more than $13 million in the hopes that it becomes an economic boon for the area.

The rock-climbing, zip-lining adventure park failed to make a profit in its first year, and its operator sought to turn a corner this upcoming season. The city isn’t expecting to see much revenue come from the park this year, Rudolph said. But if stay-at-home restrictions loosen, the park’s success this summer could be reflective of when and how the local economy bounces back.

“People are starting to get a little stir crazy,” Rudolph said, “and if they can spend a relatively small amount of money and do something that brings a small amount of enjoyment, something like Quarry Park, maybe they’ll want to take advantage of it” and spend a day shopping and eating in downtown.

Folsom

Folsom is projecting a $5 million hit on the general fund due to the COVID-19 crisis. Next year, officials are anticipating an even bigger hit.

Officials were initially projecting about $93.5 million in general fund revenue in next fiscal year. Now, they’re thinking it’ll be closer to $85.3 million, and that’s “if the economy stabilizes,” according to City Manager Elaine Andersen. Folsom this week sent a letter to the governor asking for control over when it can open its economy.

“The final version presented to the council for their consideration will look quite different from the version we had developed before the COVID-19 public health emergency erupted, unfortunately,” Andersen said in a statement.

The city hasn’t had to lay off or furlough permanent city employees, though many on-call and temporary staff “are no longer on the job” because of the stay-at-home order.

Small to mid-size cities like Folsom “are in a dire position economically in this crisis,” she said. Non-essential city programming has been completely shut down, she said, and sales tax revenue has been significantly impacted.

“We need to get our economic engine revving so that we can continue to provide essential services,” Andersen said.

Folsom’s rainy day fund currently stands at about $17.4 million, and the city “will likely depend heavily on this fund to finish out this fiscal year, and get through the next one,” according to Andersen.

A draft of the city’s preliminary budget for next year will be presented to city council May 12.

Citrus Heights

At this point, the city has not had to cut programs or staff, according to City Manager Chris Boyd. But city leaders are already beginning to work with departments to “prioritize necessary services,” he said.

“The final forecasting hasn’t been locked in,” according to city spokeswoman Nichole Baxter, but internally the city has started to predict how short Citrus Heights might come up this fiscal year.

Like virtually all cities, officials are expecting lower sales tax revenue. Rent money from the city-owned community center, which can accommodate up to nearly 1,000 people, is drying up, said assistant city manager Ronda Rivera in a statement.

One revenue stream many other cities can rely on isn’t available to Citrus Heights — property taxes. In order to incorporate as a city in 1997, Citrus Heights struck a deal where the city’s property tax revenue goes directly to the county.

“Our city’s history of fiscal responsibility means we are not strangers to working strategically with limited resources,” Boyd said in a statement.

Elk Grove

The city anticipates a $13.7 million reduction in revenue next year, as money from sales tax has taken a hit from the closure of most retail businesses.

Much of that stems from the closure of Elk Grove’s auto mall, which accounts for about one third of the sales tax revenue the city gets, the city’s finance director Brad Koehn told the Sacramento Area Council of Governments. Officials expect to see vehicle licensing taxes, about 18 percent of the general fund, also decline.

Elk Grove will cut back on what Koehn called “discretionary” spending by freezing unfilled positions and will stop paying extra money to overfund pension liabilities.

The city is less reliant on property taxes than some other cities, which felt the burn of sinking home values during the Great Recession more acutely. But this new economic crisis will feel different, according to city manager Jason Behrmann.

“We expect this one to be worse for us because we rely much heavier on sales tax which is a bigger percentage for us,” he told the city council earlier this month.

Rancho Cordova

Before the shut down, 70,000 people commuted into Rancho Cordova to work, said city manager Cyrus Abhar.

Stay-at-home orders have devastated local restaurants heavily dependent on the lunchtime crowd, he said. Occupancy rates at hotels have gone down to about 20 percent. “You can imagine the devastation there.”

“This is a crisis still in the making,” Abhar said.

Rancho Cordova is expecting to see a $2 million shortfall this current fiscal year, Abhar said. That’s led the city to cut non-essential costs like consulting and study work for a community development project along Folsom Boulevard.

Incorporated in 2003, the city doesn’t have legacy costs like massive pension obligations. Because most of the city’s businesses are large corporate and construction companies, business-to-business sales taxes revenue is still coming in despite workers staying home, Abhar said.

It’s too early to say whether Rancho Cordova will have to dip into its roughly $12 million reserves, Abhar said. For now, he expects the city will be able to make tweaks to spending to accommodate the decrease in revenue over the next few months.

“The message that I gave to City Council is whatever I tell you today, it would be outdated and obsolete a month from now,” he said.

Davis

The city has curtailed hiring of new staff, including seasonal temporary part-time staff to cut costs, according to Diane Parro, the city’s director of community and business engagement.

“At the City of Davis we are well aware that COVID-19 is currently, and will continue to significantly impact city finances,” she said in an email.

Davis did not release information about how big its revenue shortfall for this fiscal year will be. The city is “engaged in initial review and analysis of the impacts,” and will hold a financial outlook workshop during its City Council meeting May 5, she said.

West Sacramento

The city hasn’t finished calculating specifics on the budget impacts of COVID-19, but revenue is down, said Mayor Christopher Cabaldon. The city has not had to make cuts yet or lay anyone off, he said, but it’s unclear how long that will last.

“We already know we will take a big hit, but we don’t know the full magnitude,” Cabaldon said.

The City Council will hold workshops on the city’s budget during its first two meetings in May.

Though West Sacramento isn’t dependent on hotel tax money, the city is preparing for impacts on property and sales tax revenue that would come with a recession.

It’ll be a balancing act to ensure bread and butter local government services like sewers and roads are maintained while also investing in programs that protect the city’s most vulnerable, Cabaldon said.

It remains to be seen whether smaller cities like West Sacramento might see some relief from the federal government. Seeing federal stimulus money pass over smaller local governments has been particularly frustrating, Cabaldon said, as was hearing Senate Majority Leader Mitch McConnell argue “local governments should just prepare and go into bankruptcy.”

“It’s not that simple,” Cabaldon said.

Sacramento County

The region’s third largest employer with more than 12,000 workers says it has not laid off or furloughed any regular full-time or part-time employees so far.

But the county is already directing departments to start looking for ways to reduce costs, including not filling vacant jobs unless they’re critical. Last year, the county slashed department budgets, with officials arguing at the time it was required to finance jail upgrades.

Unlike most cities, it will be more difficult for the county to estimate the extent of the pandemic’s economic impact — it typically doesn’t get its sales tax and realignment money until two to three months after it is collected, according to the county’s chief fiscal officer Britt Ferguson.

Getting solid data will be even more difficult this year because of Newsom’s order allowing small businesses to defer sales tax payments, he said.

All told, Sacramento County was expecting to receive about $1.8 billion for the general fund, with about 40 percent of that coming in the form of sales taxes.

“We expect there will be significant reductions in these revenue sources both as a result of the measures taken to limit the spread of the virus and the impact of the resulting economic downturn, which at this point appears to be considerable,” Ferguson said in a statement.

The county also expects to see hotel tax revenue decrease significantly, though the total amount it usually generates for the county is only about $6 million.

Like the city of Sacramento, the county received millions in federal coronavirus stimulus money, totaling about $181 million. But the county has not determined what that money will fund. It cannot be used to make up for revenue shortfalls, but officials are still getting guidance on how it can spend the money, county spokeswoman Kim Nava said.

Given the rapidly shifting nature of the pandemic, county staff plans to roll over the current budget for next year and wait to propose major revisions in September, when they have a better sense of the economic landscape and where cuts might need to be made.