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Dire Financial Outlook

Difficult Choices In The Time Of Covid-19: Making The Right Decisions For Today And For The Future

by Tabatha Miller, Fort Bragg City Manager

If you have monitored recent City Council meetings, you know that the City is trying to measure the impact of COVID-19 and the world-wide economic shut-down on our local economy. The City depends on local businesses, especially our hotels, retail stores, restaurants, bars, gas stations, and local attractions to collect the City taxes added to the businesses’ sales. This means that like many of our businesses, the City is dependent on tourism. Tourist-based economies have been hit hard by this shutdown. The worldwide hotel industry is down 90%. 

The City’s General Fund which pays for most of our basic City services, including Police, the costs of our Volunteer Fire Department, Parks and Trail Maintenance, Community Development, Code Enforcement, Engineering, Economic Development, Visit Fort Bragg, the Noyo Center and Athletic Fields contributions, and City Administration relies on sales tax and Transient Occupancy Tax (TOT). These two sources make up approximately 47% of the City’s General Fund budget. With nearly all of the City’s 900 plus hotel rooms empty, I have estimated that TOT collections may be down 90%. The tourists that visit Fort Bragg and fill those rooms account for around 40% of the City’s total sales tax collections. Regional residents account for about 33% with the remaining 27% coming from Fort Bragg City residents. Add to this impact the number of businesses which are closed or severely limited in their ability to transact businesses. And finally, we have to consider the sheer number of employees who are no longer working or who are working fewer hours and buying what they need or just what they can afford. 

With the estimated decreases in City fees and other taxes, the City’s General Fund is likely spending $425k more a month than it will bring in. This means that in the five weeks since March 18, when the County’s Shelter-in-Place Order was mandated, the City has already used up the $490k Recession Reserve created by City Council last year – plus more. I don’t expect the Governor or the County Health Official to give the full green light to our local tourist economy before late summer. This means that without cutting staff and services, we will likely continue to eat up reserves in the months to come. In total, the City’s General Fund had $3.14 Million in reserve as of July 1, 2019. I estimate we have $2.6 Million now. 

By the end of May, if my estimates are even close to accurate, this could be down to $2 Million and by the end of June at $1.5 Million. This means City reserves built up over many years may be reduced by half in just three and a half months, well before we expect to start an economic recovery. I have never experienced anything like this in my life. Trying to model the impact of the global shutdown on our local economy is challenging. It is also serious. For the City, it means balancing the ability to continue to provide services, preparing to support our community and businesses when we do open back up, against difficult staff reductions now. My projections are likely off by some factor. My hope is that I have been too pessimistic but my fear is that I have not been sufficiently pessimistic. 

The City’s most recent General Fund Financial Projection is available for viewing at city.fortbragg.com, under Agendas & Meetings, Special City Council Meeting on April 20, 2020. 

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