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Previously:

• Crescent City's Financial Picture Is Slightly Improved, Though A $594,000 Deficit Exists Due To COVID-19

• Crescent City Council Adopts "Phase 1" Budget Amid Ongoing COVID-19 Concerns

• With Projected $800k Budget Hole For 2020-21, City Will Keep Pool Closed Through the Summer

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Though COVID-19 depleted Crescent City’s two main revenue sources in the final quarter of the previous fiscal year, things weren’t “quite as bad as it could have been.”

Finance Director Linda Leaver told Councilors on Monday that economic forecasters in April predicted huge losses in sales and lodging taxes due to a lack of consumer spending, a ban on most short-term stays and a drop in travel nationwide due to the pandemic.

The actual outcome for the final quarter of fiscal year 2019-20 was a bit better than anticipated, however, Leaver said. The first quarter of 2020-21 is also looking to be a bit more optimistic than forecasters thought, she said.

But, COVID-19 still created significant losses in sales and TOT, the main revenue sources for Crescent City’s general fund, Leaver said. The finance director also noted that things “could get better or it could get worse” as 2020-21 progresses.

“In August and September we received a little bit better news, but better in the sense that it wasn’t quite as bad as it could have been, but not better in the sense that it’s good,” Leaver told Councilors when discussing the pandemic’s effect on sales tax revenue. “There are some positive indicators that consumer spending is rising, however there are some concerns that the (economic) stimulus is fading away, so that may not continue.”

According to Leaver, the preliminary ending fund balance for 2019-20 about $1.5 million. She noted that though the data is available, auditing is still in progress.

For fiscal year 2020-21, Leaver said the projected ending fund balance will be about $900,000.

Leaver noted that at a June 8 budget workshop, her staff projected nearly $5.3 million in revenue. This is now almost $5.5 million since sales tax wasn’t a huge loss. However, expenses are expected to be about $6.6 million, she said.

Leaver said received sales tax data for the final quarter of 2019-2020, which ended June 30, in late August. Sales tax revenue data for the first quarter of 2020-21, from July through September, won’t be submitted to city staff until the end of November, she said.

For transiency occupancy taxes, data for the first quarter of the 2020-21 fiscal year won’t be ready until about Oct. 31, Leaver said. She added that though she can provide updates on the 2019-2020 fiscal year, the city is still in the auditing process.

According to Leaver, for 2019-20, the initial projection in June was a drop of about $200,000. The city’s sales tax consultant and economic forecasts were basing that projection on anticipated reduced consumer spending, business closures, high unemployment and California Governor Gavin Newsom’s sales tax deferral program that allowed businesses to delay remittances of sales taxes to local governments.

Instead, sales tax revenue for the final quarter of the previous fiscal year dropped by about $22,000 thanks to a variety of economic stimulus programs, Leaver said. This includes programs helping businesses keep people on the payroll, extra unemployment benefits and continuing online sales while brick and mortar stores were closed, she said.

For the first quarter of 2020-21, Leaver said she and her staff initially projected a decrease of about $170,000 in sales tax revenue due to impacts from the pandemic. At the end of August, Leaver said that projected was revised to about a $95,000 drop.

For transient occupancy taxes, which lodging facilities remit to the city, Leaver said she and her staff projected a drop of $320,000 in 2019-20 compared to the previous year. This, she said, was based on a drop in travel as well as a ban on most short-term stays in the community.

The actual decrease in TOT for the final quarter of 2019-20 was roughly $240,000, she said.

“Not as bad as it could have been, but still definitely a significant loss,” Leaver said.

Though reports for the first quarter of the current fiscal year aren’t due until Oct. 31, Leaver said her department had initially projected a budget drop of about $600,000 compared to normal. In late August, Leaver presented a general fund update that included a drop of $585,000 — $115,000 less than the initial projection.

“I have reached out to multiple owners and gotten a few responses, which tell me that if (they) hold true across the board, we should be able to increase that projection somewhat again,” Leaver said.

Leaver noted that Del Norte County adopted its 2020-21 budget about two weeks ago, which included a status quo projection for sales tax and transient occupancy taxes. She noted that the county relies more on property taxes and state revenues than on sales tax and TOT.

Leaver also noted that Del Norte County is receiving more than $2.7 million in Coronavirus Aid, Relief and Economic Security (CARES) Act dollars. The city, she said, is receiving $82,000.

“I’m happy that it’s not as bad as it could have been,” Leaver said of the revenue decreases. “We are still showing that unless things continue to improve beyond what we’ve already seen, our fund balance at the end of this year would be $900,000, which is not a sustainable number going forward. And that is without being able to reopen the pool yet.”

In a following presentation, Crescent City Recreation Director Holly Wendt unveiled a reopening plan for the Fred Endert Municipal Pool during the COVID-19 pandemic. But she and City Manager Eric Wier noted that it would cost the city between $220,000 and $250,000 to reopen it and if the number of local cases or its positivity rate changed, the city may have to shut the pool down again.

Opening the swimming pool would decrease the projected 2020-21 ending fund balance of $900,000 to between $660,000 and $680,000, Wier said. This, he said, is significantly less than a City Council policy of maintaining an ending fund balance of 25 percent of budgeted expenses, which Wier said is about $1.5 million.

Other Council priorities not currently in the budget include the Crescent Fire and Rescue master plan, a staff plan for the Crescent City Police Department and some street repair projects — all of which would benefit from a voter-approved proposed 1 percent sales tax increase if it passes in November.

The city has also been unable to remit its payment toward the Public Employees Retirement System liability, Leaver said.

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