With help from the Fed, Costa Mesa officials begin to build a bridge to a post-pandemic future
The Costa Mesa City Council this week reviewed a $163.5-million budget plan projecting revenue gains that, when coupled with nearly $10 million in disaster reserves and federal pandemic assistance, could help the city build a bridge to post-pandemic recovery.
Although the economy-eating pandemic began little more than 14 months ago, its timing has caused impacts that have been felt across three different fiscal years, City Manager Lori-Ann Farrell Harrison explained Tuesday during a council study session.
However, being able to tap into a declared disaster relief fund and a commitment of some $26 million made available from the Biden administration’s American Rescue Plan will go a long way to restoring massive cuts made to city spending during the pandemic.
“This is an historic budget,” Farrell-Harrison told council members. “It allows for us, as a city, to start bringing back the services … and starting to piece the puzzle back together again.”
Finance Director Carol Molina presented the highlights of a proposal that anticipates $144.6 million of revenue coming into the city’s general fund and expenditures of $154.4 million in expenditures but also tells a story of trends and habits during the pandemic.
Projections estimate the city could receive $61 million in sales tax and $49.5 million in property tax in the year ahead, which Molina attributed Tuesday to potential increases in luxury and online sales and deepening investments into residential properties.
“We assumed an essentially flat property tax,” she said. “However, as we moved into this current fiscal year, that did not occur. The housing market flourished — people staying at home really invested money into their homes and, in essence, there was a larger percentage of sales in the housing market in Orange County.”
While the Finance Department forecasts receiving $5.6 million in transient occupancy tax revenue, as Costa Mesa tourism begins to rebound, those receipts are still well below the more than $8.6 million seen in a typical year.
To close the gap between incoming revenue and outgoing expenditures, staff recommend the city use $3.2 million from a declared disaster reserve fund and $6.6 million in American Rescue Plan assistance.
Molina said the federal funding would help backfill losses sustained during the pandemic, while the disaster reserve would allow the city to restore personnel cuts, including a 5% furlough that realized $3 million savings in 2020-21.
The City Council previously approved allowing more than $10 million to be taken from reserve funds to help cover pandemic losses if needed. But Molina said Tuesday if revenues and taxes came in stronger than forecast, the city may not need to use the $3.2 million dedicated in the budget proposal.
“We’re hopeful that we’re going to see revenues come back. However, we want to be conservative and make sure the funds that are before you tonight are self-sustaining,” she said.
Council members questioned aspects of the plan, indicating projects and programs they’d like to see in the fiscal year ahead and pondering the best use of public funds during a time that is still not without uncertainty.
“I think what we have before us is a good balance of some fiscal restraint but also an acknowledgement that there are things that this council wants to do, that our community wants to have done, and we’re going to invest appropriately to make that happen,” Councilman Jeff Harlan said of the process.
The proposed budget for Fiscal Year 2021-22 will be vetted and possibly amended by council members, city commissioners and committee members in advance of a June 30 deadline. The first public hearing at the council level is scheduled for June 1.
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