With 35 days left to adopt a balanced budget, we don’t really know how we will get it done. The news is getting worse, not better. For several weeks, we have been working with deficit projection of $27 million, but that has increased to nearly $30 million due to reassessment of revenue projections.
Currently, the city manager and staff have compiled a list of about $15 million in cost savings that constitutes the low hanging fruit.
The potential savings that have generated the most public interest are the prospect of closing pools and libraries. Both are close for the time being due to COVID-19, but they are not within the $15 million list shown above.
The COVID-19 pandemic is a significant contributor to the deficits; however, its effects are in addition to an already-growing “structural” deficit in the City’s budget, meaning overall expense growth rates have been outpacing revenue growth rates for the past several years.
COVID-19 impacts include significant losses of sales tax, losses of TOT (hotel tax), and continuing uncertainty in all revenue sources.
Other budget pressures include pension costs, unfunded deferred maintenance, subsidies to the Richmond Housing Authority, Chevron UUT settlement payments, labor cost pressures, Redevelopment Successor Agency payments to the state, and low cash reserves.
On June 2, the city manager will present one or more strategies to get to a balanced budget. These will likely include layoffs and/or union concessions.
Revenue generating strategies include the possibility of one or more ballot measures for the voters to consider this November, but the uncertainty involved will not affect the FY2020-21 budget process.
One potential revenue source needs more attention—economic development to grow our real estate tax base. There are a few bright spots, mainly new development, that will ultimately bring in additional revenue:
- Residential development: 434 units under construction, 1,023 units entitled, and 745 units under review
- Warehouse development: nearly 1 million square feet either in construction or under review
- Hotel development: two 100+ room developments under review
However, there is stiff resistance to other potential development projects that could bring millions of dollars in new revenue, including Point Molate and Richmond Bay, from a small but vocal minority.