The COVID-19 pandemic will have a substantial impact on the city’s finances this year and into early 2021, with revenue losses and new expenses causing at least a $38 million projected hit to the budget, according to a memo released Monday.
John Gross, director of Financial Management for Long Beach, cautioned in the memo that the assessment may understate the impact of the pandemic on the city. The analysis also assumes “a return to a very strong economy” after early 2021—a prediction he concedes may be optimistic.
At least five key funds are being severely impacted by the response to the pandemic:
The General Fund
By far the biggest hit will land on the roughly $554 million general fund, which pays for basic services like parks and libraries, and employee salaries, including police and fire personnel.
The losses from the pandemic are expected to be $13 million to $19 million in fiscal year 2020, if nothing is done to stem them.
The bleeding in this area is due to declines in sales tax, the transient occupancy tax (a tax hotels pay for room stays) and oil revenue. The cost of a barrel of oil is now $22; the city projected it would be $55 a barrel in its 2020 budget.
There has also been a significant increase in costs associated with the pandemic: The city on March 3 activated an Incident Management Team and the Emergency Operation Center shortly after. Through the end of March, $2.8 million has been spent in unbudgeted overtime costs; total costs are $5.5 million.
The city hopes to recover some of those expenses from state and federal COVID-19 funding sources, but some may not be reimbursed, the memo said.
The projection also does not include any costs associated with relief efforts under consideration by the city, including rent deferral, tax rebates, loans and other programs.
With far fewer shoppers spending money in Long Beach, the city is expected to lose roughly $7 million in sales tax for Measure A projects and salaries.
Still, the memo notes, the fund may wind up within budget due to conservative projections when the city approved its financial plan last fall.
Measure A was a 1% sales tax increase approved by voters in 2016 to pay for road repairs and other infrastructure work, as well as increased police and fire personnel.
Special Advertising and Promotion Fund
This fund is primarily supported by the hotel bed tax and is especially vulnerable to an economic downtown, the memo notes.
The loss of revenue in this fund is expected to be at least $2 million, Gross wrote.
The Tidelands Operating Fund
This fund, supported primarily by revenue the city reaps from oil extraction, is expected to take a $6 million hit.
Tidelands funds can only be used for projects along the coast, including the Queen Mary, Rainbow Harbor, Aquarium of the Pacific and others. A significant portion of funds for the planned $85 million Belmont Plaza Pool project were also to come from this pot of money.
The Airport Fund
The Long Beach Airport, which has experienced a “high cash drain due to loss of revenue,” is expected to take a $10 million loss as a result of lower passenger fees and the capital costs of a number of improvement projects underway, the memo said.
In the memo, Gross said it is hoped that the increased staff costs as a result of the pandemic will lessen by May and June. By then, the city will have more information that would allow officials to compile longer-term projections.
At that time, staff will conduct a budget study session to update the City Council, including options for balancing the budget and “other solutions available to minimize the impact on services.”
In the meantime, management is taking actions to control costs, such as delaying or suspending projects where possible, maximizing state and federal reimbursement, evaluating one-time spending and scaling back costs that are deemed non-essential.
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