Concord officials predicting steep revenue shortfall due to pandemic

Concord officials believe the city’s revenue in this fiscal year will be $10 million less than projected, largely due to the coronavirus pandemic’s economic impacts.

The city released a budget update last week detailing a rocky financial outlook. A new sales tax that went into effect on April 1 and federal relief dollars arriving in the coming months will not offset the $10 million shortfall from an original projection of $109.5 million in revenue this fiscal year.

In the previous fiscal year, Concord posted $7 million less revenue than it projected, prompting the City Council to reduce spending and eliminate 36 jobs. But the city has struggled even more financially

this fiscal year, especially after a winter COVID-19 surge forced a second statewide stay-home order.

Much of the shortfall has stemmed from Concord’s sales tax revenue, which sharply declined when most of the local economy came to a halt several times in 2020. Revenue from a hotel tax also suffered greatly, and the city was unable to draw any money from local parks programs by renting out community centers.

The new 1 percent sales tax, Measure V, replaces an existing half-cent tax and is expected to generate an additional $13 million annually (on top of what the existing tax already produced). But this fiscal year, the city expects to receive only about $3 million from the sales tax increase.

Not included in current

projections is relief money through the American Rescue Plan, which President Joe Biden signed into law last month. City officials expect the plan to deliver $26 million to Concord over the next two years.

However, it remains unclear exactly how cities will be allowed to spend that money. The U.S. Department of the Treasury is still determining where relief dollars can be applied. And after the federal guidance comes down, the City Council and staff will need to figure out a spending plan, which they likely won’t be able to complete before the end of the fiscal year.

“We’re still waiting for some of the rules,” said Guy Bjerke, Concord’s economic development director, in an interview. “It was touted as being able to backfill certain areas of losses, but some of it will continue to have COVID-19 requirements

where you have to demonstrate that you use the money” to offset pandemic-related losses.

The city’s current game plan is to put most of the revenue generated from Measure V and federal relief toward one-time capital improvement projects, including roof maintenance at the Concord Civic Center and HVAC air filters for the police department.

Last week, the city also approved a $1 million relief program for small businesses that have incurred losses during the pandemic.

Still, the steep financial hit from COVID-19 has not been as heavy as Karan Reid, the city’s director of finance, expected when the pandemic began taking hold of the country just over a year ago.

“Revenues have been coming in better than anticipated, although they’re still down,” Reid said in an interview. “I guess ‘better’

is relative, but we’ve all been surprised that it wasn’t worse than what we expected.”

Certain parts of the retail industry proved resilient over the past year: Car sales, for instance, did not drop as much as expected despite local stay-home restrictions and disruptions to the supply chain.

And while Concord’s sales tax revenue took a major hit overall, it saw gains in one area: online retail, which spiked alongside the pandemic. The city gained revenue from large retailers such as Amazon

and Wayfair, thanks to a 2018 Supreme Court ruling that requires online sellers to charge local sales tax.

Building projects also paused during the early weeks of last year’s spring stay-home order, but soon resumed construction. The city processed roughly as many permits during this fiscal year as it did in other years, despite an overall loss in revenue, Reid said.

At a meeting on May 11, the City Council will begin discussing its budget for the 2021-22 fiscal year.

While the next budget will include a larger share of projected Measure V revenues, it likely will still not include money from the American Rescue Plan.

“I don’t know that we’re going to have sufficient guidance to provide the council substantial info,” Reid said, adding that staff will act rapidly to earmark the money when it does arrive. “We’ll likely have to provide what we know and have (the relief money) move in parallel. Hopefully, we’ll be able to expedite the money as quickly as we can.”