Millbrae’s financial footing slips amid pandemic

Finance Director Mike Sung laid clear the economic damage done, while hoping that a corner has been turned and that a rebound is on the horizon.

“It’s been a rough year, but there is a light at the end of the tunnel,” said Sung.

While officials adopted a budget last June with limited expectations regarding revenue, some key sources of income are showing returns even lower than the measured projections.

Most notable among those is transient occupancy tax, which only generated 23% of its budgeted income through the middle of the fiscal year. With COVID-19 devastating the travel industry and experts projecting a slow recovery, Millbrae is anticipating only receiving $2.2 million in hotel tax this year — down $2.5 million from the original $4.7 million expected at the beginning of the fiscal year.

Income from parking taxes and fines or forfeitures is projected to be down a combined $600,000 as well, which officials attributed to the lack of travel and other activity during quarantine.

In all, the general fund is slated to tick down from an adopted $32.2 million to $30.7 million.

It’s not all bad news for Millbrae’s finances though, as property tax revenue is on track to generate its budgeted roughly $12.5 million. Additionally, sales tax income is expected to reach its roughly $2.2 million adopted at the beginning of the fiscal year, despite the challenges local businesses faced during the shutdown.

“Sales tax appears to be a little more resilient than anticipated and performing slightly better than projected,” said a budget report.

Some of the financial losses will be offset by federal financial aid too, and Millbrae expects to receive about $4.2 million in stimulus money.

Spending reductions further helped balance the budget against lost income. Most notable is a $1.5 million credit from the San Mateo County Sheriff’s Office, because Millbrae overpaid previously toward salary and benefits.

Officials made clear that the savings in the law enforcement budget line was not associated with a reduction in service, but rather a repayment by the county.

For her part, Councilwoman Gina Papan expressed her appreciation to Sung for his work tracking the city’s finances and adjusting expectations during a difficult stretch.

“Thanks for maneuvering and working through this critical and unforeseen circumstance,” she said.

In other business, officials also reviewed Millbrae’s progress in reaching its housing development goals.

Measuring residential construction progress against the Regional Housing Needs Allocation cycle ending in 2023, Millbrae has approved and permitted 367 of its assigned 663 units, according to a city report.

Of the remaining roughly 300 units that must be built to meet the RHNA target, all are among those reserved for residents earning between low and moderate income. The city has achieved its goal in approving and permitting units for those earning above moderate income.

Officials are optimistic an affordable housing development approved at the BART station with 80 below-market-rate units will soon be eligible to count toward the RHNA target.

Additionally, officials expect that a forthcoming inclusionary zoning discussion could lead to adoption of a policy that will require builders to include some affordable housing in development proposals.

For her part, Papan said she considered the progress toward meeting the city’s housing goals a signal of the willingness among officials to approve development. But she balanced that perspective against a desire to assure that growth is managed in a fashion that preserves the city’s fragile economic balance.

“We are trying to build sustainably and move forward,” she said.

austin@smdailyjournal.com