Coronavirus knocks large hole in city budget—up to $41 million

Long Beach is in for much more economic pain than originally anticipated as the city’s projected economic shortfalls were adjusted Tuesday night to reveal a hole in the annual budget that could be as much as $41 million.

City Manager Tom Modica revealed that new number during a presentation to the City Council on the response to COVID-19.

A memo released last month put the coronavirus’ projected toll on this fiscal year’s budget at $13 million to $19 million, but Modica said Tuesday that the city stood to see a shortfall anywhere from $25 million to $41 million. Long Beach’s overall budget is $2.8 billion, but most of the pain from the shortfall will be felt in its $554 million general fund.

The impact beyond the coming fiscal year remains uncertain. Projections for 2021 previously showed a $9 million to $16 million hole. Those numbers have yet to be updated, Modica said, but they’re likely to be worse than originally thought.

“It’s still very uncertain what’s going on out there,” Modica said.

The effects of COVID-19 and its associated economic shutdown have been wide-ranging, from dramatic dips in sales tax to hotel occupancy, which the city collects taxes on, being about 75% less than normal.

Modica also noted the drop in parking citation revenue since Long Beach suspended giving street sweeping tickets until May 18. And the city’s tidelands fund has been hit hard by the drop in the price of oil as a global glut of crude has sent prices spiraling downward.

On top of that, there are the new expenditures of responding to the pandemic, which Modica said has cost the city about $14 million as it has shuffled resources and created an information center that is staffed seven days a week.

The city is expecting to be reimbursed by the federal government for about 75% of those costs, but it would still leave a $3 million to $6 million tab.

To close the shortfall, the city could cut from capital improvement projects and cancel the summer police and fire academies this year, according to Modica. The latter will be part of a hard freeze on hiring that he said was likely in the coming years.

The prospect of cutbacks similar to those experienced during the Great Recession of the mid 2000s led to a brief debate over what the council might prioritize going forward as it works to close a budget gap of tens of millions of dollars.

While services and activities—summer classes, concerts—may be cut in the immediate future because they’re not allowed under social distancing, other cuts could get controversial when the city moves into budget season this summer.

“For me, the priority for the entire city is what are the basic core services that every resident in this city is entitled to?” Councilwoman Suzie Price said. “We’re all going to have our different opinions about what core services are, but at the end of the day we’re going to need to have quick response times when residents call 9-1-1. We’re going to have to be able to address infrastructure needs throughout the city.”

Councilman Rex Richardson said that the city should be careful in what it considers cutting because some historical disparities in investment could have contributed to the unequal impact that COVID-19 is having on the city. Black and Pacific Islander residents have been hit especially hard in Long Beach and across the state.

“To say let’s limit infrastructure investment or whatever it is but maintain this core service, I don’t think that’s the city we are today,” Richardson said. “Maybe that’s who we were in the past, but that’s not who we are today.”

The city finalizes its budget annually in September before the start of the new fiscal year in October. However, updates on the toll that COVID-19 continues to have on the local economy are likely in the coming weeks and months leading up to the start of formal meetings where the council and its committees will structure the budget and propose what services could be cut in the coming year.

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Jason Ruiz covers City Hall and politics for the Long Beach Post.
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