Half Moon Bay faces $5.4M budget gap

Travel to the coastside increased in 2021 and 2022 as COVID-19 pandemic restrictions eased up, City Manager Matthew Chidester said; however, this year, domestic and local travel is down and outbound international travel is up — which has a big impact on hotel patronage.

“On top of that, some of this inbound international travel is down, especially among China and other Asian countries. Most of our international travel here in the Bay and to the coastside, especially to places like the Ritz-Carlton, comes from China,” he said. “One of the biggest areas that has been hit with travel is high-end hotels, and of course we depend on our high-end hotels here on the coast for that [transient occupancy tax].”

Krystlyn Giedt, Half Moon Bay Chamber of Commerce president, said that the group would be requesting an increase to the Half Moon Bay Business Improvement District's assessments on hotel stays to produce more proactive advertising for prospective coastside visitors.

“We will be, with the blessing of the hotels, coming to you late this year to increase … the $1 a night [BID] to $2 a night,” she said. “No fiscal impact to the city, but will hopefully allow us to do more of that outbound marketing.”

The city is facing a revenue shortfall of around $805,000 for the year, taking into account smaller losses from property tax revenue and gains from additional funding of $368,000 for the CARES program, which provides community policing alternatives for 911 calls.

It’s taking a conservative approach to its budgeting in response to hotel tax losses, Chidester said.

“To what degree it will rebound and how sustainably that will be really remains to be seen. We are really being extra conservative,” he said.

Although last year’s budget saw savings of around $1.4 million, Stiles said, the money has been absorbed, leaving only $144,000 for the year unassigned and around $11 million in reserves.

Departments have been advised to avoid budget increases unless absolutely necessary, although increasing litigation costs saw an expenditure adjustment of half a million for the City Attorney’s Office.

But the upcoming budget deficit — a combination of falling revenue and generally increasing costs — is largely unavoidable without major changes, Stiles said.

“It’s structural in nature. The only way to resolve it is to increase ongoing revenues or decrease ongoing expenditures, or a little bit of both,” he said.

The city is taking steps to review its finances, including a cost allocation and fee study to determine exact costs for city services as well as a full expenditure review to find costs in the budget that are either unnecessary or not required to serve the community, Chidester said.

Although staff’s ultimate goal is to limit the impact of cost-cutting measures, they might eventually have to evaluate challenging budget decisions.

“We are identifying opportunities to make cuts to our expenditures,” he said. “Some of the things that eventually we will have to look at is our staffing levels and how we operate our services and make some tough choices down the road.”

The City Council approved the midyear budget review and subsequent budget adjustments based on presented financial revenue.

holly@smdailyjournal.com

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