The Hemet City Council while hearing about a “positive” third quarter revenue increase, but due to the economic downturn caused by the coronavirus, it may be the last increase for many more quarters, according to the city manager’s report.
Hemet city manager Christopher Lopez gave his fiscal year 2021-2022 budget process report to the council Tuesday, April 28, during a teleconference meeting from the city council chambers.
In a third quarter budget update, Lorena Roch, Hemet’s finance director, said all city revenues were up in all categories including sales taxes, hotel taxes, property taxes, Measure U sales and other revenue streams through March 1, reflecting the boom economy before the coronavirus pandemic struck the nation, state, county and the city.
But it will be a different outcome in the final and fourth quarter that ends June 30, according the city manager.
“Our initial projection of revenue loss for fiscal year 2020-2021 is $2.8 million in the general fund and an additional $1 million in Measure U sales tax,” Lopez said in his report. “Because of the impact of the COVID-19 pandemic, we anticipate significant reductions in the upcoming year, to deal with our loss of revenue. Revenues are still being reviewed, so we will update these projections as we receive for information.”
He supported his report by estimating that in the next 15 months, the city could see losses of up to $7.5 million from the lack of sales taxes, hotel taxes and gas taxes due almost no consumer sales in the current pandemic. However, he said he could not give a specific figure until all the department heads give him their revised budget estimates, which they are now in the process of determining.
He explained that the majority of the sales taxes, including the 1% Measure U sales tax, come from the city’s car dealers who have experienced a major drop in sales since the pandemics “stay at home” order was issued by federal, state and county public health officials.
He said there has been a 70% reduction of sales tax revenues coming in from the city’s car dealerships, as an example of how much residents, and others coming into the city, have stopped buying since the COVID crisis began.
He also mentioned that revenues from the Senate Bill 1 gas tax measure may drop by as much as 20% or as much as $1.6 million this year. He said Measure A sales taxes could also see a 25% reduction.
“We just don’t know,” Lopez said.
He told the council that something has to be done to meet the looming drop in revenues and pointed to the fact that 75% of the general fund budget is designated for public safety.
“No matter how you look at it, public safety is going to be impacted,” Lopez said.
With that statement, he said while no furloughs have been given to any city employees at this time, all unfilled positions have been eliminated from the planned fiscal year budgets, including the addition of new police officers.
He said the fire and police departments are currently reassigning their officers, firefighters and paramedics to fit the greatest needs in the community in light of the pending economic downturn. He reiterated that no police officers or firefighters are being furloughed and none of the city’s five fire stations are closing.
Fire Chief Scott Brown took the microphone to dispel any rumors that the city’s newest fire station No. 5 in the eastern part of the city is closing.
“The station is not closing,” Brown said, although the one engine at the station has been moved, leaving a full firefighter/paramedic squad and captain at the station based on the area’s needs. He said that Station 5 has the most medical calls than any other station.
Councilmember Karlee Meyers, who represents the eastern Hemet district, took exception to the engine change, fearing her constituents, many who live in mobile homes, could be in greater danger of fire and lower response times without the engine.
Brown said the medical calls from the station were much higher than any structure fire calls and that mutual aid from nearby Cal Fire stations are on call in that event. Meyers still was not satisfied with the administrative change.
“In addition to the short term, next year’s fiscal implications of the pandemic, we also must consider the long-term and macro effects on the global economy,” Lopez said in his budget process report. “Costs will continue to increase, including unfunded liability for PERS (Public Safety Retirement System), we will need to anticipate decreased returns on investments and the impact on unfunded liabilities. We also need to consider long-term cost reduction and methods of boosting revenue.”
Lopez explained that almost all department heads, even though they had just completed their fiscal year budget projections that would have balanced the budget as assigned, are once more revising them because of the unprecedented economic downturn and the anticipated revenue loss caused by the COVID-19 pandemic.
The council took the report under advisement and scheduled a critical May 26 budget workshop.
Tony Ault can be reached by email at firstname.lastname@example.org.