After learning the city could face a potential $76 million budget deficit through June 2021 due to the coronavirus pandemic, the Palm Springs City Council on Thursday discussed the dire financial outlook and brainstormed ways to address the funding gap.
The marathon meeting featured more than 90 minutes of public comments and three hours of council and staff discussions. The council will continue discussion on the budget during its next meeting on Thursday.
“The reality is that we’re going to have to figure something out to get through this, but I think there’s full confidence that we will get through this and come out the other end strong again,” Mayor Geoff Kors said.
In a staff report released Monday, the city predicted a significant potential budget deficit through the end of the 2020-21 fiscal year that could potentially be bridged by using reserves, freezing some expenditures and cutting jobs.
About $47 million of the potential $76 million in revenue loss is expected to occur during the 2020-21 fiscal year, according to city staff. Some of the steepest revenue losses, by percentage, could be in transient occupancy tax and sales tax revenues.
Transient occupancy tax revenues could drop 61% from budgeted revenues in the 2020-21 fiscal year, according to the city. Sales tax revenue could drop 63% during the same time period.
At this time, the city doesn’t have sufficient unrestricted reserves to cover the shortfall.
The city report cautioned that the estimates are subject to change.
But “given the uncertainty of when the state and local economy will be able to open, which will likely be in phases over time, the process toward full recovery to pre-COVID revenue levels for the City will likely take months if not years,” the report warns.
After a lengthy series of public comments, which featured residents calling to voice support for police, fire and the animal shelter, City Manager David Ready led an initial discussion about the budget and offered potential solutions.
“Every service in the city is important,” he said.
He said the possible $47 million loss in funding for the next fiscal year is an average between potential losses of $33 million and $61 million.
If the city used some of its general fund reserves to address the existing losses predicted in the current fiscal year, the city would still maintain some general fund reserves and more related to California Public Employees’ Retirement System costs, he said.
For the remainder of the fiscal year, which ends on June 30, city staff anticipate a potential loss of $29.2 million.
In order to address the projected deficit for the current fiscal year, the city could freeze nearly $10 million in expenditures and use more than $19 million in unrestricted reserves from the city’s general fund.
City staff outlined multiple areas where cost savings are possible over the next 14 months.
Potential non-personnel savings could come by reducing administrative budgets, reducing landscape maintenance, deferring tree trimming, cancelling the skate park operations contract and more, among others, according to the city.
Another option to reduce costs is to cancel, in whole or in part, or suspend major capital projects such as the downtown park.
The city outlined three scenarios that list varying degrees of savings from hiring freezes and layoffs.
Some of the scenarios propose a reduction in non-sworn police and fire department staff. Other scenarios yielding more savings include deeper cuts, including a possible reduction in police officers.
Several officers — including Sgt. Mike Casavan, Capt. Mike Kovaleff and Lt. William Hutchinson — spoke in support of retaining police staff and said the department protects not only the city’s residents, but the millions of tourists who visit every year.
If any of the scenarios are approved, personnel savings in the next fiscal year could be between $11.5 million and $17.6 million, according to the city.
In the staff report, city staff said a “re-alignment” of city services will be required given the magnitude of the deficit.
The city referred to the Palm Springs Animal Shelter, a no-kill facility, as an example of the “higher level” of services provided in the city compared to other cities in the valley.
During the meeting, Ready identified a potential cost savings of roughly $300,000 from the shelter and talked about asking the nonprofit that manages the shelter what that budget loss might look like.
During the public comment portion of the meeting, many spoke in support of the shelter and its impact on the community.
Council weighs in on budget
For several hours, the council discussed the shortfall, brainstormed possible expenditures that could be reduced and asked questions of city staff.
Early in their discussion, the majority of the council supported using nearly $20 million in general fund reserves to address the projected current fiscal year deficit.
“I can’t think of a rainier day than what we have had over the last two months,” Councilwoman Lisa Middleton said.
The council came to the consensus of not taking funds out of the CALPERS reserve at this time.
The council also talked about identifying properties owned by the city that it could sell, but stopped short of committing to sell any land.
After a lengthy discussion, the council indicated it wanted to see the downtown park eventually be completed but wanted to know options for slowing the build in an attempt to reduce costs.
Other topics of discussion included Measure J funds, city-owned golf courses and the skate park.
“The longer we wait to make reductions, the more reductions we’ll have to make to get the same savings,” Kors said. “I think every one of us, me included, is going to see things we would really like to see not cut cut.”
The council will continue discussion on the budget at 3 p.m. Thursday.
Previous reporting by Desert Sun reporters Christopher Damien and Melissa Daniels was used in this report.
Shane Newell covers breaking news and the western Coachella Valley cities of Palm Springs, Cathedral City and Desert Hot Springs. He can be reached at [email protected], (760) 778-4649 or on Twitter at @journoshane.
Read or Share this story: https://www.desertsun.com/story/news/local/palm-springs/2020/05/14/palm-springs-city-council-discusses-coronavirus-related-budget-shortfall/5187734002/