CARLSBAD — The COVID-19 pandemic is causing serious concerns and financial drops regarding municipalities and their revenue streams.
The city of Carlsbad addressed their expected shortfalls for the end of the Fiscal Year 2019-20 and into 2020-21 and beyond during its April 14 meeting. The city is projecting decreases in sales tax of $3.2 million for April, assuming a continued full shutdown, as its revenue streams have dramatically dropped.
Property taxes, meanwhile, are projected to decrease about $1.2 million and are temporary, according to Laura Rocha, deputy city manager. In addition, the forecasts show at least another year of decreased revenues and staff is projecting an 18- to 24-month recession.
Assuming a total shutdown through May, Rocha said projections show shortfalls between $15 million to $16 million.
“These restrictions are something we’ve never experienced. It has disrupted the economy across the country, state and here in Carlsbad,” Rocha said. “The virus has transformed the way Americans spend their money. We can see the low unemployment rate in California until January. Now, it has spiked up to 7%.”
Mayor Matt Hall and Councilwoman Cori Schumacher each said they expect a more serious economic fallout. Hall, referencing the 2008 Great Recession, said the city must develop a tight, conservative budget instead of being reactive.
In addition, he said the council and staff should begin looking at activating Capital Improvement Program projects later this year because costs will be lower and a way for the city to create jobs. CIP money is earmarked for specific projects.
“If we can do that, that would be totally unbelievable,” Hall said of the city’s budget rebounding in two years. “In 2008 we built a very conservative budget. I would rather see a very conservative budget rather than a reactive budget. I’d rather see a budget with a 2023 future. Even if we get back in 2023, that would be optimistic.”
Rocha, meanwhile, said the city will also lose revenues from business licenses and renewals, recreation fees and interest income. Another challenge, is small businesses with less than $5 million or less in taxable sales are allowed to defer $50,000 in sales tax for up to one year.
Rocha said the city has about 1,700 businesses that qualify, which totals $5 million the city would not collect until 2021-22. She said business licenses and renewals are expected to drop by about $800,000.
“We are hoping for more relief for the money deferred or revenue shortfalls,” Rocha said of potential funding from the state or federal sources.
This year’s General Fund budget was projected at $170.5 in revenue with 42% from property tax, 22% sales tax and 17% from TOT. Sales tax losses are projected in a complete shutdown through April is $3.2 million and through May the total reaches $5.3 million.
The hotel tax, meanwhile, is expected to drop significantly as all 45 in the city are closed, Rocha said.
New budget estimates, which began in January, are expected to drop by about $10 million. The rebound isn’t expected until 2022-23.
TransNet taxes are expected to decrease from $3.4 million to $3.1 million, while the gas tax revenue decreases from the state are between 15% to 30% for this fiscal year and a 10% to 20% drop next year, Rocha said.
“We’re looking at this in steps. If this situation should worsen … we will have to take measures over and above what we’re planning to do today. And even for our projections for 2020-21.”
As for potential staff furloughs, City Manager Scott Chadwick said it is a last resort and the city will continue to assess those decisions moving forward. He said the city will attempt to look at cuts in other areas before furloughs are implemented.