The city of Santa Cruz is projecting the Covid-19 pandemic-related recession will last four years and that the budget crisis will continue for even longer than that.
It could be eight years before the city returns to normal, Santa Cruz Finance Director Kim Krause told reporters on a recent Zoom call. On Thursday evening, the Santa Cruz City Council is expected to adopt the revised budget for the 2020-21 fiscal year, which is now under way, during a special meeting that begins at 6pm.
After the pandemic started, the city began dipping into its financial reserves. Those reserves are set aside in part in order to respond to emergencies, including ones that the city faced this year—as well as ones that may still be to come.
“We had a pandemic happen and then fires,” City Manager Martín Bernal said. “Anything can happen. We need to have reserves at all times.”
Krause said it could be six years before the city restores its reserves and an additional two years before the city is able to fully reverse the depth of its cuts.
Part of the budget crisis was structural, stemming from pension obligations, payroll and other costs that predated the Covid-19 pandemic.
The new revised budget—which includes $5.3 million in cutbacks—comes after approval of a placeholder budget in July and meetings held by a three-councilmember Ad Hoc Budget Committee over the summer.
Earlier this year, the city of Santa Cruz furloughed its workforce, created an early retirement program, initiated a hiring freeze and cut back its department budgets. The total cuts that city staff are now bringing forward to the council include $1.7 million to the Santa Cruz Police Department and $1.1 million to the Parks and Recreation department. (Those departmental cuts include early retirements and position eliminations.)
The city is also shifting some economic development money into the general fund. City staff may schedule mid-year budget check-ins for December and February.
Additionally, Bernal said the city will look at placing a measure, like a sales tax initiative, before voters for a possible special election in 2021.
Some city councilmembers had been exploring the possibility of a new hotel tax for ballots in November of 2020. But after the pandemic decimated the local tourism industry, they ruled that out.