Galen Kusic, Editor

A city report was released last week stating that the City of Benicia is expecting a projected net result shortfall of $2.5 million this fiscal year and $8.5 million for next fiscal year due to COVID-19 and shelter-in-place orders.

“With the reduction in restaurant and retail activity, and travel being curtailed, our sales tax revenues are much lower than normal,” said City Manager Lorie Tinfow in a statement. “There are other revenue reductions, too.”

At the Tue. city council meeting, councilmembers and the public had the opportunity to hear a report on the state of the city’s finances. While it was merely a discussion item, staff will return in June with a recommendation for how to bring the two fiscal years’ budget back into balance.

“The action for tonight is to merely accept the forecast,” said Mayor Elizabeth Patterson.

Finance Director Cindy Mosser, Assistant Finance Director James Russell-Field and Senior Management Analyst Sarah Terherst gave an update on the forecast of the general fund for fiscal years ‘19-20 ( July 1, 2019 through June 30, 2020) and ‘20-21 (July 1, 2020 through June 30, 2021).

The updated forecast is primarily focused on revenues and provides a scenario based on forecasted impacts to Benicia. That scenario will be used to start building potential recommendations on the course of response.

“The depth and duration of the economic impact experienced during this time are influenced by several things, but most notably it’s influenced by the length of the shelter-at-home order,” said Terherst. “The longer the shelter-at-home order remains in effect or is extended will elongate the episode we are going through now.”

The overwhelming assumption made by Dr. Robert Eyler, PhD of Economics at Sonoma St. is that “financial impact equal to a combination of the Great Recession and 9/11 on various business sectors” will take place. The finance department came up with its city revenue forecast through analyzing specific historical trends and current available financial information from the state, League of California Cities and various financial consultants and economists.

During 9/11, sales tax revenues decreased by 8.9 percent and during the Great Recession they decreased by 14.4 percent. Similar impacts, if not worse are expected immediately.

Next steps will include a report and summary for a mid-cycle budget update on June 16 with an update to year-end projections for fiscal year 19-20 based on additional actual revenue and expenditure figures. The update will also include key revenue receipts for sales tax to help staff pinpoint year-end revenues and a recommendation to balance the 19-20 and 20-21 budgets.

“I appreciate the conservative approach,” said Patterson, who thanked the finance department for their concise and detailed report.

Patterson discussed the potential for cities to receive future federal funding from another stimulus bill, noting that this would help immensely toward economic recovery locally.

“This hit us with slightly more than a quarter of the fiscal year left,” said Councilmember Steve Young. “Whatever gains we had in the first three quarters are not only going to be wiped away, but will be hit equally further to the tune of a 30 percent drop in the last quarter. That’s pretty radical.”

Vice Mayor Christina Strawbridge brought up that with Amazon sales through the roof, it could bring in additional sales tax that might not otherwise have been accounted for, possibly lessening the blow to the city’s revenue. She also discussed addressing the housing situation in Benicia and property tax revenue and how that will also be impacted by the pandemic.

“Getting some help from our stakeholders, our business community and our real estate companies – because they have a pulse of what’s going on within Benicia specifically,” said Strawbridge. “We’ve got people on the ground that can really help us.”

More of these questions will be answered in June when more data is available.

“No one has clue, I don’t care how smart they are, what this is going to look like in Sept. or Oct.,” said Councilmember Tom Campbell. “It’s not as bleak as it looks at first blush.”