The latest update on the impact of the coronavirus pandemic revealed an even grimmer outlook for the City of Garden Grove’s financial picture than was previously assumed.
At Tuesday’s meeting of the City Council, Finance Director Patricia Song led the group through a recitation of projected revenue loss that was “worse than the worst” case presented at an earlier update.
While the city is expected to show a modest $3.2 million surplus for the 2019-2020 fiscal year (ending on June 30), the outlook for 2020-2021 is a flood of red ink.
“Total damage caused by COVID-19 pandemic [estimated] for fiscal year is $15.8 million … with 92 percent of the total damage is due to the estimated loss of sales tax and transient occupancy tax [“bed tax” paid by guests at hotels and motels],” according to Song.
The loss in sales tax is estimated at $5.1 million for the current fiscal year, with the loss of bed tax pegged at $9 million. Additionally the city has incurred $1.2 million in direct costs since the declaration of a local emergency on March 12.
While cautioning that “no expert” can accurately predict the eventual impact on the economy going forward, Song said that she and her staff had met with major hotel operators in Harbor Boulevard’s Grove District. They predicted that after restrictions were dropped, occupancy would rise from 15 percent to 65 percent, for an annual average of 60 percent by June 2021.
That means the gap between income and expenses could reach as high as $20,363,000. A less pessimistic estimate puts the deficit at $10,494,000.
Song outlined various ways of closing the gap, including a variety of cost reductions, budget savings and going into the city’s “rainy day fund.”
The budget situation will be further examined at a study session on June 2.
Also on Tuesday night, the council confirmed on a 7-0 vote a temporary outdoor dining permit program for restaurants. The ability to expand or implement outdoor dining under this order will expire when the local emergency order does.
Categories: Garden Grove