League of California Cities Forecasts $7 Billion Covid-19 Shortfall

by Sheryl Hamlin

In a webinar held April 23, 2020 and open only to credentialed press, the League of California Cities predicted dire financial conditions for California cities.

The panel represented cities of varying sizes. Each spoke of his/her city and its unique circumstances.

-Town of Yountville Mayor John F. Dunbar, League of California Cities President
-Grass Valley Council Member Jan Arbuckle, League of California Cities Immediate Past President
-Rancho Cucamonga Mayor Dennis Michael
-Fresno Mayor Lee Brand
-San José Vice Mayor Chappie Jones
-The moderator was the Executive Director Carolyn Coleman.

The Yountville mayor said the city is tourism focused and as such sees this major loss. Grass Valley, a small rural city, said they passed a sales tax addition in 2018, but this revenue has vanished. Rancho Cucamonga predicted $9 million in sales tax deficit and 80% loss in TOT. To compensate, Rancho Cucamonga has laid off 289 part-time employees and curtailed all open position requests. Fresno, one of the cities large enough to qualify for CARES (federal program) said that pre-Covid-19 they had a fully funded pension program and the lowest unemployment in years, but now all taxes, fees and gas tax revenues have collapsed. San Jose, the third largest city in California with a $3 billion annual budget, expects $110 million decline in revenues through FY 20-21. As a point of comparison, the San Jose Vice Mayor said that during the Great Recession, there was a 2.9% decline now it is 80% decline.

The following statement summarizes the anticipated problem brought on by lost revenue during the Covid-19 shutdown.


Source: League of CA Cities

Quantifying the problem, the league statisticians analyzed all reported revenue for the State of California. Most cities reported losses in sales tax, transit occupancy tax and property transfer tax. In the Q&A session, a reporter from the Associated Press asked for clarification about this number and specifically how was the total pie created and what is the size of the pie. The league statistician said this was compiled from costs for services published in past year city budgets. He said a clarification would be forthcoming.


Source: League of CA Cities

Mayor Dunbar said the league is requesting the establishment of a City Revenue Stabilization Fund with flexible allocations of $7 billion. The league would like a share of the State of California CARES fuding for cities. He reminded that only 6 of 482 California cities qualify for CARES funding.

The league published a chart showing services to be cut by size of city as shown below.


Source: League of CA Cities

Questions and Answers

A reporter from the Sacramento Bee asked if there has been clarification as to how the federal monies can be spent.

San Jose explained that federal monies from CARES can only be used for Covid-19 related expenses and expires 12-31-2020. The mayors would like an extension, he said, as well as more flexibility in using these funds.

A reporter at KCCC LA asked to compare the experiences with the Great Recession to the current economic situation.

Rancho Cucamonga reported that the other recessions were more gradual, so the city could plan a “soft landing”, while the Covid-19 is a hard, fast landing.

Fresno reported that the Great Recession economic pain was felt over five years, but this situation has started a cascading effect. For example, he said rent payments could be unpaid for 180 days, shopping center are losing tenants. The Covid-19 situation is more a Great Depression, he said, not a recession. They must find a way to re-open.

In response to short-term borrowing to provide liquidity for cities, the Executive Director said the Federal Reserve’s short-term financing does not include small amounts for cities.

The San Francisco Chronicle asked about re-opening the state. San Jose implemented a process of discussion with large company CEO’s and labor to make a plan. There has been no push-back from the State, he said. Yountville added that the Governor’s directive for re-opening the State is a “framework”.

To read the full set of charts, click COVID19 Fiscal Impact on CA Cities Infographic FINAL

To read the press release, click COVID-19 Fiscal Impact on CA Cities Press Release-FINAL.

To read more about the author, click Sheryl Hamlin dot com


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William Hicks

All this should be on the shoulders of the policy makers in Sacramento primarily. Since President Trump has given free reign on the governors to now decide what should be done, and when, it’s up to them to choose…..is it time to reopen the lifeblood of our economy or are they going to ignore the facts of life?

DON’T LOOK TO WASHINGTON D.C. FOR BAILOUTS!

William Hicks

A famous desk top message from a former supervisor of mine……”Poor Planning on Your Part Doesn’t Constitute an Emergency on my Par.”