San Diego may have to start cutting its budget earlier than expected after the months-long surge in coronavirus infections led to a massive shortfall in hotel tax revenues, according to a report released this week.
The city is projecting a deficit of $85.4 million in the current fiscal year, which ends June 30. In order to maintain a balanced budget, the city would have to dramatically cut spending or dip into its reserves — something officials hoped to avoid, at least until the next fiscal year.
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Mayor Todd Gloria last month directed department heads to prepare for budget cuts of between 2% and 8% to close a projected shortfall of more than $150 million in the next fiscal year. The grim figures contained in the mid-year budget report are likely to push that deficit projection even higher.
"The city faced structural budget deficits even before the pandemic wreaked havoc on our economy, leaving us with fewer resources to address our crumbling infrastructure,” Gloria said in a press release. “Repairing our city budget won’t be a quick or painless process."
Gloria is not recommending any spending cuts right now, holding out hope for more federal aid or the current vaccination efforts having a positive impact on city revenues.
President Joe Biden has proposed sending $350 billion in aid to state and local governments as part of a larger coronavirus relief package. But the city budget report acknowledges approval by Congress is far from certain, and it remains unclear how cities might be restricted in their spending of that aid.
The $85.4 million shortfall is almost entirely due to tax and fee revenues coming in far below expectations. In the latter half of 2020, city departments for the most part were spending within their budgets.
City councilmembers alluded to the looming budget cuts in their meeting Tuesday as they discussed their budget priorities for the next fiscal year. Councilmember Chris Cate, who chairs the council's budget committee, said the COVID-19 pandemic's toll on city finances was still emerging.
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"There's a lot of unknowns that exist out there, but the one thing that we cannot do is we can't print money," Cate said. "Understanding better what those sources of revenues are and how we're going to provide the services that our residents rely upon is going to be a daunting and challenging task ahead."
Councilmember Sean Elo-Rivera said cuts should be data driven and take into account that some neighborhoods are currently suffering more than others.
"The reality is that the impact of a reduction of a library or park and rec hours is simply not the same for a neighborhood where the average family can afford tutors or enrichment programs as it is for a family that is barely getting by," Elo-Rivera said.
