While financial reports for Santa Maria confirm significant economic impacts from the COVID-19 pandemic in the spring, small upward trends in revenue during the summer are leaving city officials more hopeful.
Total revenue losses projected through June were about $1 million less than expected, according to City Manager Jason Stilwell, but impacts from COVID-19 still leave the city facing an expected $9 million revenue loss through June 2022.
To remedy these losses, the city will have to draw from its emergency reserves, such as the Local Economic Augmentation Fund (LEAF).
"It's not making up the lost revenue, it's just less of a loss," Stilwell said of the financial reports. "I think we're hopeful that we won't have to use all of the reserves that we had anticipated to use."
Shortfalls in sales tax continue to cause major problems for city funds, as the tax is used to fund public safety, quality of life and youth service programs through Measure U.
COVID-19 impacts caused close to $1 million in total sales tax losses in the 2019-20 year, according to city financial director Mary Harvey, and the city expects to see a loss of $1.8 million in the upcoming year in sales tax revenue.
"The decrease is due to lower sales in the majority of industry categories including autos and transportation, general consumer goods and business and industry," Harvey said.
City staff said there are glimmers of hope where revenue was higher than expected.
While the city saw a significant loss in revenue from the hotel industry in April, with revenue 61% lower than the same time last year, the industry has gained more strength in the past two months, according to financial reports presented to the City Council on Tuesday.
"On a positive note, the city and hotel industry had projected even deeper declines and some hotels are reporting stronger occupancy than had been expected for the summer months," Harvey said. "Hotels were hit hard by the economic shutdown ... but are getting stronger now than anticipated."
Areas that showed higher revenue than the same time last year included property tax and permits, which Harvey said were far less affected by the COVID-19 pandemic.
While the city saw severe drops in key revenue sources, actual spending was down from the past year in several areas, partially due to the lower number of city programs and events permitted to operate amid COVID-19 closures.
Mainly, Harvey said, city spending was lower due to the cancellation of programs and events by Recreation and Parks and the Santa Maria Public Library during the summer months.
As various sectors began to close during the economic shutdown in March, the city began to form its budget for the upcoming fiscal year with the anticipation of losses in the multi-millions of dollars, leading to tough decisions in June surrounding position and program cuts.
Included in these anticipated cuts is the unfunding of two currently-staffed firefighter positions sometime within the 2021-22 fiscal year. During budget deliberations in June, members of the fire union pushed back against these proposed cuts, pointing out they would cause the loss of one of the city's fire response units.
At Tuesday's City Council meeting, Santa Maria Fire Capt. Seth Wells asked the city to reconsider the budgeted cuts to the department, considering that the city lost $300,000 less in Measure U funds than projected in March.
"I come before you this evening to ask City Council to set aside Measure U excess funding to save two firefighter positions .... which will keep the engine from being cut," Wells said during the public comment period.
Stilwell clarified that while Measure U losses weren't quite as bad as expected during the fourth quarter, the loss is still there, and personnel remain expensive to fund.
"As you recall with the budget adoption, the challenges we had with funding were related to increasing costs of personnel, more so than ... the drop of revenue," Stilwell said.
He added that city officials will continue to re-evaluate the budget as further quarterly financial reports come in, with the most changes likely to take place during the midyear cycle in February and March.
Financial reports also included updates on local unemployment rates. In June, the unemployment rate in Santa Barbara County dropped to 11.6%, following a rate of 12.9% in May, according to the most recent data from the state Employment Development Department (EDD).
In Santa Maria specifically, the unemployment rate dropped to 12.1% in June, following rates of 14.1% in May and 16.9% in April, according to Harvey.