Manteca is holding fast on all general fund expenses for the fiscal year that starts July 1.
That includes not filling non-critical positions as they become vacant, not starting non-critical capital improvement projects covered by the general fund, and making do with current annual department spending levels.
The directive issued by City Manager Miranda Lutzow reflects the reality that the city is facing serious drop-offs in revenue running the gamut from sales tax, hotel room tax, gas tax, and possibly even business licenses due to the state orders put in place to deal with the COVID-19 pandemic. The city is also bracing for potential state shenanigans such as holding on to the local share of sales tax receipts for up to a year as they did when the Great Recession struck in 2008 in Sacramento’s bid to avoid state employee layoffs and cuts to welfare and other programs.
Lutzow said the city’s $18 million in general fund reserves means the city will not be laying off city workers or imposing pay cuts. She added, however, that the majority of the 90 part-time workers that were laid off last month who work in recreation department programs will not be hired back until there are fees generated from people signing up for various endeavors ranging from the after school Kids Zone to adult basketball leagues.
Lutzow noted that in an absolute worst case scenario there are other general fund reserves restricted by council order that could be tapped such as the economic development reserve.
The fact Manteca has a much more robust general fund reserve that is almost 40 percent of the $46.6 million budget needed to operate day-to-day service such as police and fire as well as streets, parks and such instead of 25 percent most other cities strive to obtain is allowing the city to avoid cutbacks that other municipalities are currently contemplating.
Lutzow plans to present a “place holding” budget to the City Council in June that is essentially a carbon copy of this year’s budget. The goal is to have the council adopt that by July 1 to allow the continued operation of the city.
It is what virtually every other city in the state is doing as no one has a firm handle on how much carnage was caused by the shutdown of most businesses for the last three weeks of the first quarter that ended March 31 and the impact the pandemic has had on the second quarter that started April 1 and ends June 30 will have on revenues to finish the current fiscal year. At the same time experts are faced with the daunting task of determining how fast the economy in terms of spending will come back after July 1 that impacts budgeting for the 2020-2021 fiscal year.
The prospects aren’t promising for a quick recovery based on financial data reported Monday. Credit card spending in March adjusted on an annual basis plunged 31 percent — the biggest drop since 1989. At the same time people nervous about losing jobs or having pay cut stepped up the national savings rate from 8 percent in February to 13.1 percent in March. That is the largest rate of savings in 34 years. That is on top of a 14.7 percent unemployment rate that is expected to still climb.
The fact the previous and current council have strung together six consecutive years of balanced budgets while at the same time worked at creating bigger reserves is working in Manteca’s favor.
Manteca is now position to the point that if it didn’t collected a single cent of the $13.2 million in sales tax they collected in the 2018-2019 fiscal year as well as the $1.3 million projected this year in room taxes they’d be able to cover ongoing expenses next year with the $18 million reserve. The reserve, as it is, will take a hit from a drop in sales tax and hotel tax expected this year that the pandemic stay at home orders cannibalized.
Assistant City Manager Lisa Blackmon noted consultants hired by the city to help forecast revenue for the next fiscal year indicate Manteca is in better shape than many cities as the lion’s share of its budget is from property taxes that are expected to take a minimal hit if any in most cities due to the pandemic.
Property taxes generate $17.8 million annual for Manteca based on the current budget. The fact Manteca is still growing even in the pandemic means that figure will be higher next year.
Another area of concern is the half cent public safety tax that is funding 32 police officers and firefighters. While it has a reserve, it is not large enough to fund all 32 positions for a year. Still the city should be in a position to backfill Measure M receipts with general fund money of needed.
Overall, the city has a $181.9 million budget that included the $46.6 million general fund.
The rest of the budget includes enterprise accounts supported by ratepayers such as water, solid waste collection, and wastewater treatment. There are also funds that collect money from growth for specific purposes and legally can’t be spent for anything else.
Capital improvement projects involving non-general fund money will likely continue moving forward including the expansion of city hall. Not only is the money restricted for specific purposes but the city is likely to get more bang for the bucks spent on construction projects during an economic downtown.
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