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City Committee Will Hear Economic Update, Which Hinges Upon Outcome of Measure P

Meeting will include a forecast for several industries

Published on Monday, October 19, 2020 | 5:54 pm
 

If Measure P fails to get voter approval on Nov. 3 and $18 million from Pasadena’s electric utility is not transferred to the city’s general fund, there could be “significant reductions” in other areas, said city Finance Director Matthew Hawkesworth.

Hawkesworth’s comments came on the eve of a general financial update planned for Tuesday’s meeting of the City Council’s Economic Development and Technology (EDTech) Committee.

According to Hawkesworth, the city’s fiscal year 2021 adopted budget was balanced with a commitment to maintaining a balanced budget and included delaying more than $8.5 million in capital improvement projects. The city’s five-year forecast shows a precariously tight budget in the coming years, so any significant revenue losses would require offsetting expenditure reductions to maintain a balanced budget.

“To keep things in perspective, the power fund transfer to the general fund that is on the ballot this November [Measure P] represents $18 million in revenue to the general fund,” Hawkesworth said. “If this ballot measure is not supported by voters, the loss of this revenue will be impactful to the general fund budget and would require significant reductions.”

According to city officials, the loss of these funds would impact 911 response, first responders, public health programs, senior services, homeless programs, housing programs, and street repairs.

In other areas of the economy, a report by HDL Cos. included with the EDTech Committee agenda states the COVID-19 pandemic forced the closure of entire industries that generate sales and transaction taxes that are vital for governments to deliver public services.

Sales tax is the city’s second-largest general fund revenue source, generating more than $55 million a year, according to Hawkesworth.

“As part of preparing our April and June economic forecasts earlier this year, we acknowledged the second quarter of 2020 [April to June period] would be the bottoming out months for sales tax revenues,” according to the HDL report.

“Beginning in March, shelter in place orders, coupled with county-based health and safety decisions, triggered immediate closure of businesses, a spike in unemployment, and much uncertainty about economic recovery.”
According to the report:
Despite seven straight quarters of declining construction permit issuance, delays caused by the pandemic workplace standards slowed projects enough to create a backlog that will mask the decrease of future development inventory through November for the Bay Area and Southern California regions.

In business and industry, initial recovery is primarily related to accommodation to the pandemic and climate-related changes. Strong demand for warehouse and shipping technology and equipment support the shift to online shopping in addition to home offices and virtual classrooms, which does not bode well for local businesses.

In the food and drug industries, people are expected to continue eating at home. Cannabis companies are adding new tax revenues as more establishments become open with approval from local jurisdictions. So far, Pasadena has issued two cannabis permits.

Sales taxes from fuel and oil are expected to continue declining for the next three quarters, with recovery beginning in the spring of 2021.

Brick and mortar turbulence will continue to linger as merchants navigate economic headwinds while trying to balance reopening stores with public health and safety concerns, the report states.

Although consumer spending saw a quick recovery in June as retailers began opening doors, that has leveled off since July at just under 15 percent of pre-COVID levels. New demand for electronics, appliances, and home furnishings spurred by the need to create work from home and virtual learning environments are anticipated in the short term.

“Federal stimulus combined with a lack of outlays on fuel and entertainment allowed households to make use of excess discretionary income,” the report states. “Initial third-quarter reports show spending being tempered as unemployment benefits expired and consumer confidence staggered to a six-year low. Our projections have tax volumes staying below the pre-pandemic peak through fiscal year 2021-22.”

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