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With many of its businesses closed or operating at reduced capacity due to statewide coronavirus restrictions since March 19, the relatively small City of Signal Hill is expecting a significant hit to its sales-tax revenue.
Sales taxes collected from Signal Hill’s automotive and retail businesses comprise about 70% of the 2.2 square-mile City’s general-fund revenue, according to its 2019-2020 budget.
“We are bracing ourselves for a significant fiscal impact,” City Manager Hannah Shin-Heydorn told the Signal Tribune in an interview this week.
Regarding Governor Gavin Newsom’s May 4 statement that businesses may start reopening by Friday of this week, Shin-Heydorn said the City will follow Los Angeles (LA) County’s guidelines, which takes its lead from the governor but may make its own regional assessment.
Regardless, at least two months of lower-than-expected sales tax is forcing the City to revise its operating budget with lower revenue projections.
The City expects to receive a consultant’s report later this month with exact sales-tax revenue for January through March, Shin-Heydorn said. But municipal departments are already working on trimming expenses, including for public services and programs.
Departments will present revised projections for fiscal years 2020 to 2022 during a public budget-workshop on Thursday, May 28. The workshop will begin at 6pm either at City Hall’s council chamber or virtually if social-distancing restrictions are still in place, Shin-Heydorn said.
Because of the City’s heavy dependence on sales-tax revenue, it is more vulnerable than cities with more diversified revenue sources such as tourism, hotel taxes or higher property taxes, Shin-Heydorn said.
“The sales-tax hit is pretty big,” she said.
In addition, the State has allowed small businesses to defer tax payments, which impacts the City’s cash flow.
“We’ll have to plan for those deferrals in our projections as we look at fiscal-year 2021 in terms of the timing of when we should be receiving those,” Shin-Heydorn said.
While she doesn’t know the exact number of businesses that have had to temporarily shut down, Shin-Heydorn said she is not aware of any that have had to close permanently.
However, she said a number of businesses have asked about the Small Business Administration’s Paycheck Protection Program, part of the federal CARES Act (Coronavirus Aid, Relief and Economic Security) that provides a low-interest loan for eight weeks of payroll expenses, including benefits.
“A lot of businesses certainly have expressed that this is going to be a trying time,” she said.
The City also hopes to benefit from the CARES Act relief, but since it has a population of about 11,600– significantly less than the 500,000 threshold the CARES Act covers– it is depending on LA County distributing those funds.
“We haven’t seen any distribution formula as of yet,” Shin-Heydorn said. “We’re just hoping that they take into account the smaller cities– and there’s quite a lot of them that don’t meet that 500,000 threshold– receiving their fair share of those supportive funds.”
In the meantime, the City is working to ensure that its police force has protective equipment, such as masks, gloves and sanitizers, that FEMA (Federal Emergency Management Agency) will reimburse.
“We want to make sure we’re protecting residents,” Shin-Heydorn said.
As far as programs and services for residents, Shin-Heydorn said she couldn’t promise that there won’t be cuts, adding that non-essential programs and services may be temporarily paused.
“In the short term, there will be some potential for impacts felt by the community,” she said. “The council will have to make difficult decisions during the budget workshop. But they’ve always been very fiscally prudent and they’ve always had quality of life for community residents at the forefront.”
Health orders might also impact those programs and services, Shin-Heydorn said. Even as the governor relaxes stay-at-home orders, if afterschool-childcare and library programs requires physical distancing, that could limit how big they can be.
“So the changes to some of the programs and services may not be necessarily financially driven, but may be [the] new normal that we all have to live in as we reopen,” she said.
Shin-Heydorn encouraged residents to attend the budget workshop to get a better view of the current and future situation as pertains to all departments.
“However it’s conducted, I would highly encourage residents to listen in,” she said. “It’s a long meeting, but a very informative meeting.”
The City remains hopeful that the economy will rebound strongly as it emerges from coronavirus restrictions, Shin-Heydorn said.
“This was not planned for– nobody expected a health pandemic in 2020,” she said. “We are viewing and treating this as a significant concern but it’s also a short-term concern. This isn’t our new normal forever.”