Jessica Cejnar / Tuesday, Aug. 18 @ 6 p.m.
Crescent City's Financial Picture Is Slightly Improved, Though A $594,000 Deficit Exists Due to COVID-19
Crescent City’s finance director painted a better-than-anticipated picture for the community with an increase in general fund revenue and anticipated COVID-19 relief dollars.
But, though the projected general fund balance is also anticipated to increase, since it’s still below the 25 percent reserve the City Council mandates, staff will likely not add more expenses to the 2020-21 budget.
“As we talked about in the (budget) workshop, the fund balance for the fiscal year that just ended was projected to be just over $1 million, which is already under our 25 percent reserve. The budget that was originally adopted would take that down to about $310,000,” Finance Director Linda Leaver told City Councilors on Monday. “With these adjustments, that would take our projected fund balance (back) up to about $500,000, but it is also important to keep in mind that this is still without the cost of reopening the pool.”
Leaver’s update came after Councilors approved a resolution in support of Measure S — the proposed 1 percent sales tax increase for public safety that will be on the November ballot. In its resolution, the City Council set priorities for how it would spend the additional revenue the proposed tax increase would generate.
Councilor Alex Fallman was absent.
Before the Council adopted its resolution, City Manager Eric Wier said the challenges created by the COVID-19 pandemic has created a $594,000 deficit, which equates to a general fund balance of $500,000.
“The Council has a policy of maintaining a 25 percent reserve; about $1.5 million,” he said.
If Crescent City voters approve Measure S in November, sales tax within its boundaries would increase to 8.5 percent until 2022. After 2022, with a voter-approved 0.25 percent sales tax benefitting the Del Norte County Fairgrounds sunsetting, sales tax within city limits would decrease to 8.25 percent.
The roughly $1.2 million the city’s sales tax increase would generate would help create a hybrid fire department that uses both volunteers and paid staff to meet more calls for service. It would also address staffing shortfalls at the Crescent City Police Department, pay for street repairs and make the Fred Endert Municipal Pool more sustainable.
During her update, Leaver focused on sales and transient occupancy taxes, which account for about 50 percent of general fund revenue. Crescent City is also expected to receive $82,000 in Coronavirus Aid, Relief and Economic Security Act dollars filtered through the state, she said.
This money can be used to cover increased cleaning costs or expenses for personal protective equipment, but can’t be used to backfill lost revenue, Leaver said. Since the money needs to be tracked and expenses reported to the state, Leaver asked Councilors to create a special fund and budget the $82,000 as both a revenue and an expense.
Because COVID-19 safety measures suspended operations for many businesses, retail purchasing is down, Leaver said. Though the final results for the quarter between April and June were unavailable from the state, Leaver said the city’s sales tax consultant is projecting that the city’s sales tax revenue will be about 7.5 percent lower in fiscal year 2019-20 than in the previous year.
The consultant’s projection for fiscal year 2020-21 is about 6 percent lower than the 2018-19 fiscal year, Leaver said. The consultant anticipates recovery in the 2021-22 fiscal year, she said.
“Our original 20-21 budget had an assumption of about $1.4 million in sales tax this year,” she said. “Our consultant has revised that estimate upwards by about $75,000.”
Transiency occupancy tax, the 10 percent extra visitors and tourists pay to stay at local lodging facilities, is harder to predict, Leaver said. City staff had estimated the quarter between January and March to be 30 percent below normal, though payments aren’t due until Aug. 31. However, though tax revenue for that quarter has decreased, it has only decreased by about 23 percent, Leaver said.
Leaver said she had anticipated TOT revenue for the April through June quarter to have decreased by 90 percent due to a local health order prohibiting short-term rentals in Del Norte County. Instead, the results are showing revenue for that quarter to be 56 percent below normal, Leaver said.
In the current quarter — from July through September — though TOT remittances aren’t yet due, Leaver said they have received some early payments and have reached out to local business owners.
“Our budget assumed it would be down 75 percent from normal,” she said. “What we are seeing so far, the response that we’ve gotten from business owners range all the way from they are still 100 percent closed to they’re seeing the same this year as they had last year. There’s a really wide range in what people are seeing.”
Leaver changed her July through September estimate to what it was in the final quarter of the 2019-20 fiscal year, which ended June 30.
“We would be increasing our revenue projection by $115,000,” she said. “Those two changes would result in the general fund revenue budget increasing by about $190,000.”
The Crescent City Council adopted a 2020-21 budget in June that included a budget shortfall of $800,000.
The Crescent City Council decided to keep the swimming pool closed, saving the city $370,000 a year. It also cut expenses related to travel and training, the Sister City relationship with Rikuzentakata, equipment replacement and the implementation of the Crescent City Fire & Rescue’s master plan.
Maintenance and capital improvement projects have been deferred unless they’re grant-funded.