City projects ‘significant’ drop in revenue

Smyth said officials estimate loss percentage to reach double digits

The city of Santa Clarita is reviewing how best to use $885,000 it recently allocated in federal coronavirus relief funds, as it projects a loss of revenue in the double digits of percentage drop due to the coronavirus pandemic, officials said Wednesday.

During a live broadcast, Santa Clarita Mayor Cameron Smyth was brief in his announcement on the city’s budget but said there would be a significant impact.

“Currently, we estimate a loss of revenue, reaching in the double digits of percentage drop, and that is without a doubt going to impact our city,” he said, adding that the city also expects a “significant

decrease” in transient occupancy tax — tax charged to transient guests in hotels and services.

The city expects to release details into its new budget as it nears the end of its budgeting cycle, said city Communications Manager Carrie Lujan.

“We continue to evaluate as things change and probably won’t have any hard numbers to share until we near the end of the budget cycle,” she said.

10% less sales tax revenue

Based on a preliminary look into the new budget, which the city began forming in February, Santa Clarita could look at a loss of at least 10% in revenue, including $3.7 million in sales tax revenue through at least 2020, as the sales tax projected more than two months ago was set at a flat $37 million.

Expenditures in the original budget were proposed at $113.8 million, which was an increase from $113.6 million for the current 2019-20 budget. The budget in place has a transient occupancy tax set at $3.3 million, meaning that if the city projected the same amount for the 2020-21 budget, losses could reach at least $330,000.

The budget that city officials had been working on earlier in the year, a process that takes about six months to finalize, will be completely redone to form a “hold-the-line” kind of budget with projects such as the new sheriff’s station and Canyon Country Community Center not affected as they are already funded, according to Smyth.

“No doubt that almost two months of nearly zero economic activity is going to impact the city of Santa Clarita, just like you’re hearing significant impacts to other cities in the county of Los Angeles and certainly the state of California,” the mayor said Wednesday.

These figures are only estimates and are based on the current economic projected projections, but Smyth said the good news is the city has a 20% emergency operating reserve in place for challenging moments such as current times.

For the current budget, the city’s operating reserve totaled $17.6 million.

“When it comes to budgeting, the decisions that we make during the good fiscal times are much more important than the decisions we make during the difficult times, and that’s where we are. The decisions we’ve made when times have been good and the economy has been roaring is putting us in a position to absorb the impact of this economic downturn,” said Smyth, adding that the city plans to pass its budget by mid- to late-June.

CARES Act funding

As the city prepares its new budget, Santa Clarita was recently notified of an allocation of $885,759 in federal funds through the federal coronavirus relief package, or CARES Act, that was signed into law in late March.

City officials are still in the process of determining the best use of the funding, said Lujan. Program guidelines, which the city is waiting to receive, will help guide how the money is used, according to a city agenda report.

Los Angeles County officials recently announced an allocation of more than $20 million in CARES Act dollars, of which $13.6 million is expected to go toward rental and business aid and protection for retail and food delivery workers.

The federal funds would not cover for the loss of revenue, county CEO Sachi A. Hamai previously said.

Wednesday’s city announcement comes after county Hamai released the county’s recommended budget of $35.5 billion, which will go under extensive revision before its June adoption as the county projects an estimated $1 billion drop in revenues by the end of the fiscal year (June 30) and an additional $1 billion by 2021.

During his Wednesday briefing, Smyth reminded viewers that while the community has helped in flattening the curve and as Los Angeles County looks to create a reopening plan, returning to normalcy will not be automatic, but rather incremental.

Santa Clarita, which follows safety guidelines set by the county Department of Public Health, is expected to remain as is through the extended stay-at-home order through May 15 and until further updates by the county.