Grim budgetary forecasts for Central Coast city coffers

Apr 8, 2020

Cities and community services districts around the Central Coast are facing serious financial repercussions from the pandemic.

The city of Santa Maria announced Tuesday the coronavirus shut-down is projected to cost the city at least $3 million dollars in lost sales tax revenue—the city’s main funding source—through June. Santa Maria officials say the severe financial blow is anticipated to get even worse, placing the city’s services in a “precarious position.”

The San Luis Obispo city council this week heard about that city’s expected financial blow, estimated at around $6.5 million dollars in revenue by mid-summer. Just last week, the reported losses were calculated at $5 million but then quickly corrected.

Financial director Bridgette Elke said most of the city’s income is being greatly impacted by the shut-down, with hotels running on single digit occupancy, restaurant business slashed by 40% and sales of consumer goods and gas down by about a third. That’s all lost sales and other tax money to city coffers.

Elke said this emergency has two factors that make it drastically different than anything the city has experienced before. First, all funds are being hugely affected, not only the general fund but the self-supporting ones, known as enterprise funds, as well.

“Parking is all but closed, transit is essentially running free service, and our water and wastewater funds are seeing the impact of empty stores and office buildings,” Elke told city officials.

The absence of tens of thousands of students at the Cal Poly campus is the other major factor.

“Few students remain, and no university events such as open house and commencement are scheduled to happen this year,” Elke said.

Despite the unprecedented current circumstances, the city council has to prepare a budget by June 30. The city’s finance team has prepared three different models to allow flexibility during the pandemic.

Elke said she predicts San Luis Obispo won’t return to pre-pandemic revenue levels until at least 2022 or 2024.

The city is evaluating its capital improvement program for potentially spending cuts there. It has to balance the budget and decrease the $4 million dollar deficit for the current fiscal year. City Manager Derek Johnson said city staff are trying to be flexible and make cuts without harming local business.

“We are working really hard, it is a full team effort to try to both arrest our expenditures, and do it in a way that's thoughtful, but that doesn’t send unnecessary shockwaves through the local economy,” Johnson said.

Johnson said he is asking all departments to reduce all spending by a few million dollars all together to try to close the deficit.

The city’s finance team will bring more updates to the city council in June.