San Mateo budget stable, but changes coming

The city has approximately $88 million in general fund reserves grown over the years when the economy was flourishing.

“During the growing economy, we put aside money to be prepared,” he said.

Approximately 60% of the city’s general fund, which acts as the city’s checkbook to fund day-to-day expenses like payroll, is from property tax, which Corbett anticipates will remain steady. Hotel tax has been generating about $7 million a year, and that is bottoming out. Other significant sources of revenue, the city’s .5% property transfer tax and sales tax, are more unknown, Corbett said, and largely depend on when the community gets back to business.

Corbett anticipates making a council presentation next week with more specific data and options, and noted the current situation is incredibly fluid. Recessionary imbalances can be immediately addressed through reserves whereas emerging structural imbalances caused by economic forces must be addressed through budgetary changes, Corbett said.

The primary factor will be the stock market’s hit on the California Public Employees Retirement System, or CalPERS, which receives much of its funding through investments. When the market recedes, there is more need for local government agencies and its employees to make up that shortfall.

This means that whatever budget is produced this fiscal year will have many caveats based on unknowns, Corbett said.

Mayor Joe Goethals, who has had several conversations with Corbett about the budget situation, said the city has reserves to pay the bills for six months.

“That is why we have reserves for a rainy day, because it is raining,” he said.

Revenue enhancements such as new taxes may not be palatable to a populace hurting from the economic impact, so other options will include cuts. What those cuts may look like, it’s too soon to say, but previous cuts have included worker furloughs and increased worker contributions to retirement funds.

At some point, there may be room for pension reform at the state level, or at least state intervention to aid cities, Goethals said.

Assemblyman Kevin Mullin, D-South San Francisco, said the state may be limited in its ability to aid cities unless they are facing bankruptcy.

“Our options are limited,” he said, adding that the state’s rainy-day fund will be depleted quickly and officials are looking at a workload budget with all extras removed. He did say the issue of unfunded pension obligations will certainly get more attention as the total obligation between the state and cities reaches $800 billion.

“It’s the hard reality with the contraction of the economy and the gears of the economy grinding to a halt,” he said.

Despite the immediate concern about the potential spread of the virus and the emerging concern over the economic impact, Goethals said he has seen high morale in the city during this crisis and that the people of this city are responding really well.

“I’m impressed that workers at grocery stores and gas stations have responded,” he said. “They didn’t sign up to be first responders but they are.”

He also added the city has the personnel in place should there be a surge in coronavirus cases.

“We’re going to get hit hard,” he said. “The surge is coming and we need to work together.”

jon@smdailyjournal.com

(650) 344-5200 ext. 107