News relating to the Corona Virus Pandemic’s impact on the City of Coronado’s financial bottom line was provided to the City Council during their meeting of Tuesday, April 7, 2020. And it was grim. City Manager Blair King and Director of Administrative Services Jim Krueger covered several aspects of the revenue downturn, with Krueger saying there would be a shortfall of $7.8 million in revenue for Fiscal Year 2019-20, with the revenue downturns continuing into FY 2020-21.
“There is no good news for the Council,” Krueger said. “The $7.8 million can be absorbed within the emergency response reserve balance. That would leave us with $18,705,000 in reserves. The only silver lining is our property taxes will continue at the same levels (as budgeted) with no variance. For sales tax, we are looking at what is already on the books. The fourth quarter of this fiscal year (April-June) will show very little revenue. The biggest impact is to the transient occupancy tax with a shortfall of $5.9 million from our estimated actuals. And we don’t anticipate much revenue, if any, for the remainder of FY 2019-20. We’re anticipating a slowdown in FY 20-21 with nothing going into the next fiscal year.” In addition, interest income, which isn’t a huge financial factor for Coronado, has fallen off as short-term Treasury Bills are paying interest of less than one percent.
And according to King, there is trouble looming on the horizon regarding pension debt with CALPERS. “It’s my understanding that since the beginning of March, CALPERS investments have lost $65 billion, which is 16 percent of their investment portfolio. They are still underfunded since 2008 and that will have an impact.” The overarching problem here is that any CALPERS shortfall eventually will have to be made up by the state’s municipalities, including Coronado.
Another consequence of the economic downturn is the city appears likely to reduce the Community Grant Funding, from $1 million in FY 2019-20 to $788,000 in FY 2020-21. The City ordinance governing Community Grants indicates the annual funding level is either 1.65 percent of General Fund Revenue or $1 million, whichever is less.
The Council approved three recommendations to help Coronado’s Commercial Area including directing that all parking enforcement in the commercial area be suspended during the duration of the COVID-19 Emergency; creation of curbside restaurant pick-up locations on Orange Avenue; and directed fees associated with the Business Registration Program be suspended for calendar year 2021.
But the larger issue was the creation of a Business Lifeline Loan Program where the City would make loans to local business. King said, “I am recommending capitalizing the loans at $2 million from reserves, with the purpose to help maintain the tax base as much as we can. We are suggesting at that capitalization, the maximum loan amount of $25,000 which would allow for 80 loans at that capitalization. It would be a loan to be repaid. These would be signature loans and there won’t be a lot of time to secure collateral. It would be an application loan program. I have proposed that the businesses eligible for the loan would generate sales tax and there be a narrative justification for the loan. There would be a high priority toward assisting businesses on Orange Avenue and our Business District.”
In the essence of saving both time and space, we’ll get to the two motions which were passed, and bypass most of the discussion. Mayor Richard Bailey was in favor of placing the onus for financial assistance on the Federal Government’s two new emergency business loan programs. He also suggested the city partner with non-profits such as the Coronado Chamber of Commerce and/or Coronado Main Street Ltd. to bring in an expert to help businesses help themselves via an on-line meeting or webinar. “It would be my intention for all businesses with a Coronado business license to be able to participate and it would be free.” That suggestion eventually morphed into the following motion, “Direct staff to pursue a technical assistance program to assist local businesses with federal and state economic packages.” The theory was to allow the staff latitude in supplying the specifics.
The second motion related directly to the loan package and contained the following, “The council approves in concept the Coronado Business Lifeline Loan Program; factors include businesses having to apply for Federal loans first; there will be a tiered system that prioritizes small businesses which will receive loans; the program will be capitalized at $2 million; individual loans will be maximized at $20,000; and the City staff will bring back any additional recommendations they have at the April 21, 2020, City Council meeting.” That motion passed by a 5-0 unanimous vote.