Santa Clara isn’t immune to the negative financial impacts from canceled events and shelter-in-place orders that are affecting cities across the nation, and City Hall heard a 90-minute presentation detailing some of the devastating changes to come.
Finance director Kenn Lee said Tuesday the city faces a bleak $10 million deficit the remainder of the current fiscal year, while 2020-21 could bring a nearly $23 million decrease in available funds.
In a letter last week, City Manager Deanna Santana said revenue shortages – due to drops in sales tax, property tax and transient occupancy tax from hotels and motels – have brought stricter controls on spending, including a hiring freeze, halving of temporary staffing and limiting travel. Lee said his office expects the rate of TOT taxes to drop 50 percent.
Of all the capital improvement projects – which are broken down (with pictures) in the budget – Lee said there are still nearly $300 million in unfunded projects over five years.
The largest gaps are $104 million in parks and trails and $76 million for transportation projects. pic.twitter.com/PTWEudrj7f
— Katie Lauer (@_katielauer) May 13, 2020
The city may experience additional cuts to parks and recreation programing, library hours, community events and capital investment projects, Santana said. The city has already canceled its annual Fourth of July fireworks festivities, which happened last during the Great Recession.
“This is a challenging time: Not only are we responding to a public health emergency, but we are also responding to an economic crisis that’s affecting nearly everyone in our community,” Santana said. “Our approach is now changing from a growth strategy to one that is focused on retaining public service levels.”
But while $80 million built up in one-time reserves will help bridge gaps, Santana said lags in response times for public safety and code enforcement may increase, especially as a hiring freeze has started and potential layoffs and furloughs loom.
Many city departments face cuts to salaries, benefits and materials, including the City Manager’s office budget, which will be reduced by $324,448 down to a pot of $6.1 million. The budgets hit hardest are the Electric Utility Department, which is losing $63 million and the Water and Sewer Utilities Department, which is losing $5.4 million.
But some departments’ funds actually increased, including an increase of $3.7 million for the Fire Department and $8.2 million for the Community Development Office, which now sit at $58 million and $13.5 million, respectively.
Looking at budget concerns, Councilmember Raj Chahal supports trimming salaries from top to bottom to avoid major staff cuts – from his own $2,000 monthly compensation serving on the council to Santana’s s top-ranking pay of $448,491 from an 11 percent raise in January.
“Let’s sit together with all the employees and find out the ways that we can retain every one of them at a reduced salary and benefits, because everybody understands the scenario right now,” Chahal said Monday. “To me, that would be a much better alternative to laying off people, which will reduce the services to our residents and will have other impacts to the community.”
The councilmembers supported continuing projects that will bring in revenue for the city, like the massive Related Santa Clara development project to continue providing services to residents, though it’s unknown how long the impacts of COVID-19 will last. But Councilmember Teresa O’Neill went one step further – the longevity isn’t the only unknown.
“They used to say disasters come in threes – we’ve had fires, we’ve had this virus, God forbid we have a major earthquake,” O’Neill said Tuesday. “We have to still make sure we have money tucked away … Other agencies in the area aren’t even projecting when revenues will return to February 2020 levels. It could be years from now.”
Singer public relations contract
While the city faces deep cuts in its coffers amid a looming recession, one place it is not cutting is certain consulting services – including paying six figures for another three years of work with an outside public relations firm.
The council approved another contract between the Stadium Authority and Singer Associates Inc., a prominent public relations firm based in downtown San Francisco.
Beginning July 1, the contract offers up to $170,000 in communication services through March 31, 2022, with the ability to extend the term for an additional three years. Payments will be made as services are needed, which is one reason Chahal said he’s comfortable signing the agreement during the financial downturn. However, he added that if no PR services are needed – especially as COVID-19 shutdowns continue – that money should be saved.
The agreement will have firm president Sam Singer and his staff work on advancing community engagement and outreach efforts, assisting with media relations and creating communications plans for “policies that require a high touch and strategic approach.”
According to city spokesperson Lenka Wright, approximately $70,000 in unspent funds from the current Singer contract were recommended to be carried over, resulting in the $170,000 sum.
But the lucrative contracts with Singer Associates come with some controversy. Late last year, this news organization reported that the city approved two $100,000 Singer contracts agreements without a proper bid process and while violating city code, typical timelines and industry best practices.
Now, this new Singer contract joins two other companies on the city’s robust communications team, after $100,000 contracts with both 3fold Communications and Circlepoint Communications were signed in January.
“The city is implementing the more robust communications that the Council requested and preparing for additional communications required, given that the Stadium is directly impacted by the COVID-19 pandemic as well as multiple matters that are being handled through litigation,” Wright said in an email Monday. “The Stadium Authority Board has determined that it is important to keep the public apprised and, for that reason, we continue to need consultant services.”