Virus cost San Mateo $10M in 2 months

All tax revenue sources with the exception of property tax are affected, Corbett said. Hotel tax revenue has dropped by nearly 40% since the outbreak, recreation and golf tax revenue has decreased by 22%, property transfer tax revenue is down 20%, business license tax revenue dropped 17% and sales tax revenue is 15% below expectations. 

“And it’s not just a matter of being down for this year, it’s a matter of then having to recover and pull back up,” Corbett said. “Originally we thought we’d be doing better next year, but now it looks like we’ll be in the recovery phase and it’s going to take a few years to dig out of this and get revenues back up to their baseline amount.” 

To add insult to injury, the city’s already challenging pension situation is becoming an even bigger challenge as the coronavirus outbreak has taken a significant toll on the California Public Employee’s Retirement System, or CalPERS. 

CalPERS assumes it will earn a 7% return so anything below that is considered a loss, Corbett explained. As of a couple of weeks ago, CalPERS received a -7.4% return and while that number has rebounded somewhat since then, it would take a miracle for it to climb back up to 7% this year, Corbett said.

If CalPERS maintains a -7.4% return, that would increase the city’s unfunded pension liability by $64 million, bringing the total liability over $300 million. As a result, annual contributions to CalPERS over the next 20 years starting in 2023 would have to grow by $8 million.

“The general fund hit on that would be about $6 million a year for 20 years starting in 2023,” Corbett said.

If CalPERS’ investment return this year reaches 0% — the most optimistic scenario Corbett presented, though the numbers could change — then the city’s unfunded liability would grow by $31 million and annual contributions would have to increase by $4 million. 

To address what Corbett described as a “recessionary imbalance” between revenue and expenditures, he’s initiating temporary expenditure reductions while relying on money that has been put aside over the past several years when the economy was strong. 

“Instead of spending that, we’ve been putting it away for a rainy day. Well, it’s raining now,” he said.

Corbett said there’s a freeze on hiring for most current vacancies, excluding sworn positions because they’re just being filled through overtime, and all discretionary spending is being reduced.

“The department heads and their respective staffs that manage the budget are looking at all spending and whether it truly needs to happen for the foreseeable future,” Corbett said.

Based on Corbett’s recommendation, the city will not make a planned additional discretionary payment to CalPERS this year in the amount of $2.4 million so that money can be spent on more pressing city matters instead. The 2020-21 budget is being developed based on the changing environment and conversations with bargaining groups have begun, Corbett added. 

“The initial discussions are around what we’re doing with staffing over the next month as we remain running only essential operations and then we’ll move into more substantive discussions about what the new reality is going to look like financially with the city,” he said.

Mayor Joe Goethals said moving forward he wants to avoid layoffs as much as possible and Corbett also stressed doing so will be a “last resort.”

Park restrictions

While assessing the financial impact of the virus and taking action to limit the damage, Corbett has also taken additional measures in the last week to stem the spread of the virus in the city. 

The city’s parks remain open, but with new restrictions. Playing fields, dog parks and playgrounds are all closed. Residents are asked not to travel more than 5 miles from home to recreate, and refrain from playing organized sports or pickup games. Walking in the parks is allowed, but loitering is not. 

The parking lots at Seal Point and Ryder Park are closed as are all park restrooms with the exception of the one at Martin Luther King Jr. Park and Central Park’s Fifth Avenue restroom “because we felt closing those would create greater problems based on their usage,” Corbett said. New signs spelling out social distancing protocol in English and Spanish have also been posted at the city’s parks. 

Corbett added those rules could soon change.

“We’re hoping we can keep parks open as an amenity at this time but we are monitoring this week,” he said, adding that the city continues to receive complaints about people congregating at parks against social distancing protocol. “We’re going to see how things go this week. Our last resort would be to close the parks off.” 

Corbett also said the city’s general plan process is being put on hold.

“It’s difficult for people to focus on what San Mateo’s going to look like in 2040 with what’s going on now so we felt like it’s best to put this on hold for the time being and pick it back up when operations are back to normal,” he said, adding that community engagement in the process would likely be insufficient if done remotely.

zachary@smdailyjournal.com

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