San Diego city leaders project more than $100 million in revenue loss over four months as the economy adjusts to the financial clamp caused by the coronavirus pandemic.
State and local orders put in place to protect the public and curtail the spread of COVID-19 have deflated some of the city’s major industries, which is keeping people at home and cash out of the registers.
Sales tax revenue, the city’s second-largest revenue source at around $300 million annually, is projected to fall $26 million by the end of the fiscal year, according to Mayor Faulconer. Tourism tax revenue, the city’s third-largest source of revenue, is expected to drop by $83 million. That’s $109 million lost through June 30, which is nearly enough money to pay for a year’s worth of operation in the city’s Parks and Recreation Department, the mayor said.
“This is money we count on to pay for services like police, fire rescue and libraries,” Faulconer said.
The Mayor cautioned residents Thursday at his, for now, daily news conference that he and city leaders were working on significant cuts to help the city survive the rest of the fiscal year, and beyond.
When asked if budget cuts in the works resemble fiscal trimming done during the last recession, Faulconer implied these could be more drastic.
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“Make no mistake. These are going to be some of the most significant cutbacks we’ve seen in San Diego in quite some time,” he said.
Jerry Sanders, President and CEO of the San Diego Regional Chamber of Commerce and former San Diego mayor (2005 to 2012), called times catastrophic, but said this situation is completely different than the last recession.
"We've never seen, even during the great recession, tourism just stop completely, so that was still a big source of revenue," Sanders said.
So, what's the city to do?
"You immediately freeze all spending, you immediately freeze all positions so you don't do anymore hiring, and then you look at if you need all the people you have or if you need to start furloughing or taking some pay cuts," the former mayor added.
Faulconer said service cuts will come to light over the next couple of weeks and we'll all see how that will affect people's daily lives. Sanders said the next budget proposal, which is due next month, should show some of the long term cuts.
This hit in the 4th quarter is really tough.
Former San Diego Mayor Jerry Sanders
Faulconer said state and federal relief funds will help soften the blow, and also praised the work of city leadership for building a “strong ethic of fiscal discipline,” but noted that it’s impossible to prepare for a pandemic or its aftermath.
“We’ve been saving for a rainy day. This is a hurricane,” he said. “The hole being dug here is deeper than anything we’ve seen before.”
District 7 City Councilman and mayoral candidate Scott Sherman said the city is still playing catch up from cuts made in 2004 and 2008. Similar decisions will soon have to be made, but Sherman stressed the importance of learning from past mistakes.
“We must prioritize our spending on the core functions of government and the core services that it provides to San Diegans,” he said.
And fiscal discipline will be even harder to maintain in the face of calls from special interest groups looking for relief.
“In the upcoming weeks, we’ll be getting a lot of pressure from special interest groups who want to make sure their funding isn’t cut or reduced. Those decisions will be very difficult, but have to be made. We can’t be thinking about political agendas or different special interest groups. We have to focus on the core services this government provides,” Sherman said.
On Wednesday, the City Council unanimously approved a multimillion-dollar relief fund for small businesses, and an immediate emergency law that put evictions on hold.
Nationwide, Nearly 3.3 million Americans applied for unemployment benefits last week — almost five times the previous record set in 1982.
