The Half Moon Bay City Council is considering using the city’s reserves to make up for a multimillion-dollar deficit in the upcoming fiscal year that are tied to the coronavirus pandemic.
City staff presented the 2020-21 fiscal year budget at its June 2 meeting with the City Council. The city has been forced to reconsider what had been a rosy financial picture after the coronavirus pandemic spurred a recession. With tourism taking a nose dive as the state remains under shelter-in-place orders, the city’s largest revenue source — hotel taxes — will now account for less than 20 percent of the budget for the upcoming fiscal year, according to the staff report.
The city is looking for other sources to cover that deficit. One option is using revenue left over from the San Mateo County Sheriff’s Office budget.
“The Sheriff’s Office bills the city what the costs are estimated at and if they don’t spend it all in a year they give us a credit,” Senior Accountant Ken Stiles said. “It’s been accumulating.”
Administrative Services Director Lisa Lopez said the Sheriff’s Office attributes the excess mostly to salary and benefits savings that are not realized until the end of the year. The last estimate of these funds from the Sheriff stands at $1.14 million. Lopez said the city intends to use that revenue to account for about 9 percent of the city’s budget.
“We could not afford to leave that money unaccounted for. It’s important to us to balance our budget this year and next,” City Manager Bob Nisbet said.
City staff estimates other sources of revenue such as property and sales tax to remain somewhat stable compared to previous years. But despite better projections than previously estimated, the city is still reporting a potential $1.2 million deficit for this next fiscal year.
To offset the deficit, the city intends to use its general fund reserves and its pension reserves to make its pension payments.
“We have a deficit and the only way to plug it is using the reserves,” Stiles said.
Other notable changes in the upcoming budget are a reduction of workforce with the elimination of six positions and a decrease in the use of consultants for planning or engineering. As for capital improvements, the city will focus primarily on sewer and grant-funded projects and allocate about $10 million to projects.
“I think this is an amazing success story. Somehow, we managed to get about $6 million in reserves and
protect this community and have that insurance over the next few years,” Councilman Robert Brownstone said.
Several council members recognized the imperfect science of trying to predict what will happen in the coming months, as a lot is still unknown about the trajectory of the pandemic and its impact on the economy.
“This year is going to be a moving target with a lot of changes,” Councilwoman Deborah Penrose aid. “Those numbers are going to shift. It feels totally reasonable and very carefully done and considered.”
The final budget for fiscal year 2020-21 will be approved at the June 16 council meeting.