Newport Beach proposes cutting more capital projects, dipping into reserves to fill $33.2-million budget gap
Newport Beach finance officials have found a way to balance next fiscal year’s budget with no service cuts or layoffs despite an estimated $33.2-million gap formed by the economic impacts of coronavirus lockdowns.
The finance office filled the hole through a combination of operational savings, a temporary hiring freeze, setting aside less for savings along with dipping into existing savings, and, especially, deferring capital projects.
Deferred capital makes up about $21 million of the proposed solution. Dipping into reserves chips in about $2.3 million.
“We’re in the early stages of administering financial first aid,” City Finance Director Dan Matusiewicz told the City Council Tuesday. “The budget as proposed is an initial bridge to financial recovery, but it’s not a long-term solution if the fiscal conditions persist past June ’21.”
The council will adopt the 2021 budget June 9. Fiscal year 2021 starts July 1.
The death toll from the disease caused by the pandemic coronavirus is now 145 overall, while estimated total recoveries increased to 2,358.
Mayor Will O’Neill, who also chairs the city finance committee, said the plan isn’t sustainable for more than a year. He said if the economic battering that started in March drags on, next fiscal year could see service cuts.
The budget, however, is also flexible and the city will review it in November after the first quarter has passed.
Matusiewicz said nobody knows how long the impact will last. For example, the impacts on the travel industry are still unclear, putting plenty of question marks in the tourism-driven local economy.
City officials estimate sales taxes will dip about 17% and bed taxes will drop by 66% over the current year, which has been an “already bad year,” Matusiewicz said. Conversely, property taxes will improve moderately, as those tend to lag when other economic indicators start to falter.
Next year’s budget has been a moving target. Earlier this month, the city was eyeing $16.9 million in cuts from capital projects while trying to avoid tapping reserves.
Next year’s potential $33-million hole is in addition to the projected $13.5-million impact on this year’s budget.
The deferred building and renovation projects partially or entirely put off until at least mid-2021 include Balboa Island beautification, several landscaping projects, streetlight repairs, a new Junior Lifeguards headquarters and the new lecture hall at the Central Library. Several road repairs and an overhaul of the Newport Pier will go on as planned, though.
“We’re not doing some of the beautification projects and some of the other things that would be really nice to have, but fortunately because of the planning ahead we’re doing all of the need-to-have,” O’Neill said.