CALEXICO — Although the city is still working off assumptions at this point, COVID’s effect on Calexico’s coffers could be as dramatic as $377,000 in lost program fees and revenues to the general fund, not including a projected 15-percent hit to sales taxes, according to estimates from the finance director for the remainder of the 2019-2020 fiscal year.
The good news is, based on keeping expenses in check and due to better-than-anticipated sales and property tax growth and other revenue generators in place prior to the COVID-19 outbreak, the city is still anticipating to end the fiscal year around $695,000 in the black.
The Calexico City Council was due to hear a third-quarter budget report from its finance manager and was being asked to adopt a revised 2019-2020 budget resolution during its April 15 regularly scheduled meeting.
The meeting occurred past this newspaper’s deadline.
“The current global virus pandemic is expected to severely impact sales tax and local program fees for the remaining months of the fiscal year. … However, the overall general fund projection anticipates that reserves will cover short-term 2019-20 revenue losses. With proposed amendments, the current general fund projection shows that the city is on track to hold a 4 (percent) operating reserve by the June 30, 2020, end of the current fiscal year,” Finance Director Karla Lobatos wrote in her report to the council that is part of the April 15 agenda.
“The short- and long-term impacts of the virus pandemic and the timeline for economic recovery is uncertain at best. Staff will continue to closely monitor the very fluid community and business environment and recommend budget mitigation measures as needed,” she continued in the report.
In mid-March, Calexico suffered the one-two punch of having hundreds of retail “nonessential” businesses in town closed due to state and local social-distancing orders to curtail the spread of coronavirus, as well as seeing a federal travel advisory put into effect that eliminated tens of thousands of shoppers from Mexicali who frequent Calexico retail stores and eateries every week.
Both the travel advisory and business closures are in place until further notice.
Fiscal 2019-2020 was the year of financial recovery for the city. After several years of problematic budgets that culminated in a $4 million deficit in 2016 in which the city needed to stay afloat by borrowing against its own water fund and negotiating salary and benefit reductions with employees, the city had turned a corner this year.
Not only had it paid off its water fund debt, it was able to approve cost-of-living-adjustment pay increases for city workers in late February/early March and would likely have ended the fiscal year (had COVID never factored into the equation) with a general fund end balance of around $1 million.
During the second-quarter budget report, Lobatos was projecting an end balance of $903,000 to the general fund.
Also, Calexico City Manager David Dale said sales-tax revenue was so much higher than anticipated in the fourth quarter of 2019 (which ended Dec. 31), that it is still offsetting what is predicted to be 15 percent in sales-tax losses for the second quarter of 2020, which is April 1 through June 30.
“We’ll still end the (fiscal) year (June 30) with sales tax slightly higher, but not much,” Dale said April 14.
Some of the $377,187 in projected program-revenue losses affected by COVID include $165,900 in estimated fees generated by citations and parking tickets from the Police Department; $80,000 in cannabis tax revenues; $50,000 in business license fees; $45,000 in hotel taxes; and $25,000 in fire inspection fees, among other sources, according to the report to council.
Among offsetting general-fund revenues projected for the year include $150,000 in increased sales-tax revenue; $100,000 in increased property-tax revenue/money made from refinancing bonds; $60,000 in rent paid to the city from the Mexican consulate; and $100,000 in Measure H funding transferred to the general fund, according to Lobatos’ report.
There was also an increase in general fund expenditures projected for the year since the last quarterly update, and those included $160,000 in pay raises, the report states.
The Calexico City Council is also slated to hear a briefing on the city’s five-year general fund outlook. “This five-year projection is for information and analysis only. The projection includes initial ‘placeholder’ estimates for employee costs, operations, capital and debt service, including initial amortization of the retiree medical unfunded liability,” Lobatos wrote to the council.