Solvang City Council members waded through page after page of speculation Monday night as they faced fiscal strategy and budget planning amid the COVID-19 crisis.
They moved forward with essential updates to technology infrastructure, developed a partnership with a nonprofit to further develop financial support for local businesses and revised the scope of work for the city's tourism marketing contractor to meet shifting needs brought about by the shutdown.
“COVID-19 is obviously having us shift directions and be a lot more reactive at the same time as proactive. There’s a lot of unknowns in terms of the numbers on the forecast because there are a lot of unknowns in economic conditions,” said Acting City Manager Xenia Bradford.
Chiefly, the end date of the social distancing order has yet to be determined. That order has essentially shut down tourism and related businesses which provide more than half the city’s funding.
Bradford said the county has given no indication it will change the length of the order, currently scheduled to expire May 4.
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“But when you listen to public health staff and models working from the state, they’ve been saying the end of the epidemic would be sometime in August based on the parameters they’re looking at. We have to prepare for that worst case,” she said.
Figuring no hotel bed tax collection in the short term, downgraded collection for sales taxes, fees for services based on a reduction in events and activities, and reduced interest income, the city anticipates a $2.1 million reduction in its formerly projected $9.3 million annual income stream.
“It looks to be worse than the Great Recession and possibly the Depression,” Bradford said, adding the economic standstill is national in scope. “The duration of the cessation is unknown, so it make the economic outlook harder to predict.”
Currently, the city is losing $500,000 per month in general fund revenues.
“Our hotels are right now essentially empty,” Bradford said.
But losing peak summer months could result in another $1 million per month in bed tax lost.
Bradford recommended the council look at expanding projects that would diversify revenue streams “so we don’t have more than 50 percent of revenue gone when tourism is affected like this.”
The COVID-19 shutdown is unprecedented, but the area has the potential for other similarly devastating disasters including earthquakes and wildfires.
With four council members at the dais and Council Member Karen Waite attending by videoconferencing, the council unanimously agreed to continue working on immediate solutions for local businesses while longer-term, federally backed programs get rolling.
With the $250,000 Solvang Micro-Loan Program already fully exhausted, the council directed staff to work with the National Development Council, a national nonprofit lender, to develop further programs. The programs could help local businesses access and embrace paycheck protection programs created under the national COVID Response budget package, secure federal economic injury disaster loans, and participate in the federal Main Street Landing Program.
The partnership could also allow the city and its businesses to design a revolving loan fund to bridge gaps between federal and local programs based on need now and down the road as the economy recovers.
With such trying times forecast, the council opted to continue forward with ongoing, overdue technology infrastructure upgrades only as they immediately impact citizens. Staff reported the social distancing order has highlighted the need to invest in information technology immediately. The city is conducting business online and interactions with the public is also limited to online connectivity.
“Any dollar we spend is just painful right now… If it makes it easier for what our residents are going through right now, I’m all for it,” said Mayor Pro Tem Robert Clarke.
Immediate upgrades will include installing security cameras at city buildings and a basic revamp of the city website to make it more workable.
To that end IDK Events, the firm hired to develop and promote events drawing tourists to the city, has shifted its focus to meeting the city’s web development needs in the immediate future. Council members commended the company for its flexibility in shifting duties as tides have changed.