Council Studies Impacts of Pandemic on City Finances

Posted on May 8, 2020

Along with many businesses, city finances have been hit hard by the economic impacts of the coronavirus pandemic. With a tourism-based local economy, the City of Sonoma is reliant on hotel and sales taxes which represents 54% of the City’s General Fund budget. While City revenues were trending at or above projections prior to the COVID-19 emergency, total revenue losses of more than 50% are anticipated for the final quarter of the fiscal year due to hotel and business closures, which ends June 30.

With a history of fiscal prudency by the current and past City Councils, Sonoma has built up financial reserves that will play an important role in weathering the economic storm, but hard decisions will be necessary on reductions needed to balance the budget. As a service organization, the majority of the City’s costs are for staffing (either city employees or service contracts, such as police and fire).

At the City Council budget study session on May 8, the Council received and discussed a staff presentation on the impacts of the coronavirus pandemic on City revenues, along with an update on reserve funds and initial recommendations for balancing the current year operating budget in light of a $2.7 million projected revenue shortfall.

The City Council also reviewed a five-year financial forecast as a tool to understand the impact of revenues losses and discussed strategies for moving forward on developing an FY 2020-21 budget plan in light of the high level of uncertainty for the re-opening of the economy in general and the tourism industry in specific.  The overall direction from the Council was to budget and forecast conservatively and prepare for an uncertain economic future.

City staff is developing a Budget Reduction Workbook with options for Council decision making for the coming fiscal year, which begins July 1. A Council subcommittee comprised of Council Members Harrington and Agrimonti will continue to provide input and feedback as the process continues. While many hard decisions remain, Councilmembers expressed confidence that the City and community will be able to find its way through the uncertain road ahead.

A link to the video of the Council budget study session can be found here.  A link to the PowerPoint can be found here.

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