The city of Sacramento is facing an almost $90 million loss in revenue in the coming months and next fiscal year, according to a budget proposal released on Thursday. But officials say they can balance that budget without cuts to current services or programs, and with no expected furloughs or worker layoffs.
City officials note that the budget is still subject to changes over the next 18 months, as many of its figures — particularly for sales tax — are only predictions on how the local economy may rebound.
“We already know there are numbers in this budget, the day we said ‘print’ a week ago, that have changed,” Assistant City Manager Leyne Milstein told CapRadio.
In the budget proposal, officials predict a loss in sales tax revenue, which is generated largely from stores, restaurants and gas stations. They also say restaurants will be doing just 10% to 20% of normal business in coming months, and could bring in only a fraction of the sales tax pre-coronavirus.
The city also predicts a hit in sales tax from retail establishments and gas stations, which have seen a 20% loss in the price of gas in recent weeks.
To account for the $30 million shortfall this fiscal year, from April until the end of June, the city will reallocate money from a half-cent sales tax increase, called Measure U.
The mayor and other officials had previously touted Measure U as going toward projects and development in underserved communities.
For next year’s shortfall, which is estimated at around $60 million, the city is looking at continuing to use funds from Measure U. They’ve also instated cost-saving measures like a hiring freeze for non-essential city workers.
“It really allows us to continue to do on July 1 what we do today with very spare augmentations from this current year. And what it does is it lets us have a starting point to move forward cautiously, pragmatically into the fiscal year,” Milstein said of the budget
Though the city was able to balance this year’s deficit with one-time funds from Measure U, it doesn’t have a plan for the deficits it forecasts over the next five years.
Those deficits will be due in part to the rising cost of the city’s contributions to the California Public Employees’ Retirement System, but also from what it anticipates will be additional revenue loss from business-related taxes and property tax because of coronavirus closures.
Sales tax alone makes up about a third of the city’s general funds.
“If we have folks who don’t have jobs to come back to, if we don’t have the economic purchasing power to create sales tax, if volume and value of those transactions are down, we will lose resources,” Milstein said.
She hopes there will be more fiscal clarity in the next year: “All these things that we don’t quite know yet about how this has impacted our community, those things will play out over the next 18 months for sure.”
The city’s projecting $621 million in revenue this year, but a 10% loss to about $589 million for 2020-21. Total expenditures are targeted at about $626 million, and the city thinks will still be able to bring in $80.2 million from Measure U next fiscal year.
The city has outstanding debt on projects such as the redevelopment of Old Sacramento’s waterfront, the renovation of the convention center and community center theater and the Golden 1 Center. Milstein said those debts would likely be paid with money from the general fund if revenue through parking fees and hotel taxes can’t cover them as originally planned.
Money from city parking meters is expected to be down about 95% through the end of the fiscal year, in part because the city has started to offer free parking after 4:30 p.m. on weekdays, and also because people aren’t patronizing businesses as much. Typically, this generates around $8 million a year.
The city’s hotel tax is estimated to be down about 28% for the current year, but is expected to rebound once stay-at-home orders are lifted. This typically brought in around $28 million a year.
Milstein recognized that the new budget leaves challenges in the future. Sacramento recently received about $89.7 million in stimulus money from the federal government, but there are restrictions on how the money must be used — mainly that it must be used before December 2020, and it can’t be used to fill city budget gaps.
“Some cities are a little more conservative than we are and would have never deigned to use one-time dollars to close the budget gap and would have cut it all in programs and services,” Milstein said. “It will remain to be seen how we get through the next five years.”
This story was updated to note that the Old Sacramento waterfront project is funded through its hotel tax. The headline was also updated to note that the city’s proposed budget does not have a deficit, since it has addressed next year’s approximately $60 million loss in revenue.
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