San Diego Mayor Kevin Faulconer told the City Council Tuesday to prepare for deeper cuts as the fiscal year 2021 budget comes to terms with massive economic and revenue losses from the coronavirus pandemic.
An initial proposed $3.9 billion balanced budget for FY2021 completed on March 30 is already out of date, and Faulconer said the city anticipates another loss of $50 million in revenue before a revised budget is presented to the council in May.
Total estimated losses in FY 2020 and 2021 due to the pandemic-driven economic slowdown are now more than $300 million.
The previous budget included $61.2 million in budget reductions, including the elimination of 354 full-time equivalent positions. It also included one-time actions reducing city expenditure by $84.6 million.
"We are in an environment of high unemployment, low consumer confidence and projected decreases to our consistent revenue streams, but we are also in an environment where some hospitals are reaching capacity levels and families are losing and have lost loved ones,'' Councilwoman Monica Montgomery said.
"My office plans to thoroughly review the mayor's Fiscal Year 2021 Proposed Budget and will be fully prepared to conduct the difficult conversations that will be necessary, to balance competing priorities and address the needs of our historically underserved communities," she said.
Faulconer's office proposed specific actions to mitigate an initial anticipated $109 million sales tax and transient occupancy tax loss on FY 2020, including a $54 million dip into the city's general fund emergency reserve, a use of $27.9 million in mid-year projected revenue excess and a delay of adding $12.8 million to the city's reserves.
"A few weeks ago, we had a strong economy in San Diego,'' Faulconer said. "We've never had a month like this in San Diego."
Matthew Vespi, the city's department of finance director, said the additional $50 million in estimated losses stemmed in part from the cancellation of the Del Mar Fair, San Diego Comic-Con and San Diego Pride celebrations and related hotel occupancy and sales tax loss with the cancellation of the large regional events.
He said the previous budget assumed tourism would increase in June.
The largest loss to the city is transient occupancy tax -- a hotel, vacation rental and recreational vehicle park tax -- including $83 million loss of revenue in FY 2020 and a loss of $38 million in FY 2021.
To illustrate the dramatic point, Vespi said the regional projected occupancy rate for 2020 was 76.9%. In the month of April, the local hotel occupancy rate was 0%.
The second biggest hit the city's budget plans to take is in loss of sales tax, $26 million in FY 2020 and $29 million in FY 2021.
Notable actions taken to reduce expenditure includes reduction of library hours to five days a week, reduction of public pool and recreation center hours from 60 to 45 weekly, reduced police overtime, a 50% reduction in arts and culture funding and a leasing of the city-owned stadium property on Friars Road to San Diego State University.
In total, the revised May budget will likely come out $477 million less than last year's budget, a reduction of more than 10%.
Council President Georgette Gomez said she would take into consideration a council district's resources before cutting.
"Not all districts are created equally,'' she said.
The Office of the Independent Budget Analyst will release an analysis of the budget on April 29. Staff members from the city's finance department expect to get a picture of San Diego's CARES Act relief by Friday.