SANTA CRUZ >> The Santa Cruz City Council extended a state of emergency Tuesday while unanimously ratifying immediate measures to cut spending as the city faces a $19.4 million deficit over the next two years due to the COVID-19 pandemic.
“Six months ago we were looking at a surplus and some capital projects and that is all off the table now,” said Councilmember Cynthia Mathews.
The shelter-in-place provisions enacted in response to the global pandemic will create a sizeable dent in city revenues, particularly as it relates to tourist-related taxes like the transient occupancy tax, an event tax and sales tax.
Santa Cruz Finance Director Cheryl Fife said the hit to the city’s finances could be even worse if the lockdown orders extend into the summer months or if similar measures are enacted once again in the future.
“There’s an unknown future as it relates to the shelter-in-place orders,” Fife said.
The city figures to have a deficit of $10.4 million by the end of June due to a steep decline in revenue. It projects to lose $6 million the following fiscal year, which begins July 1 and another $3 million the year after that.
City leaders already froze hiring and encouraged department heads to defer spending.
The resolution passed by the city council encourages staff to cut personnel costs by 10% for the next fiscal year that starts July 1. It remains unclear whether the reduction means layoffs, furloughs or other means of budget reductions.
The city also will draw on reserves, reduce general fund spending by 5% and delay several capital projects.
City Manager Martin Bernal offered a glimmer of hope in hinting that the federal government might reimburse cities like Santa Cruz for a portion of the lost revenue resulting from the pandemic, particularly as local governments are forced to spend more on programs aimed at curtailing the spread of COVID-19 in their communities.
“The fiscal impacts we are experiencing are different in many ways than past economic downturns,” Bernal said. “The impacts are more immediate.”
Bernal said city leaders were disappointed when they heard U.S. Senate Majority Leader Mitch McConnell express reluctance to use federal funds to prop up the finances of state and local entities across the nation. McConnell has said he feels it is wrong for the federal government to reward state and local entities that have mismanaged their pension systems and that perhaps the best avenue would be for those entities to declare bankruptcy.
McConnell has since walked back that statement, as it became clear the impact to the financial markets coupled with questions about whether state and local governments can even legally declare bankruptcy prompted the government to seek other avenues.
The city council added a measure to the resolution that encourages city staff to continue to seek federal and state assistance, as revenues dwindle.
“The state is in a much stronger fiscal position now,” Bernal said.
In a telephone town hall Tuesday night with Supervisor Zach Friend, Santa Cruz County Health Officer Dr. Gail Newel said that she plans to close beaches at certain times of day when she extends her shelter-in-place order this week. Her current order ends Sunday.
This past weekend, a glut of out-of-town visitors flocked to local beaches, raising concerns among many residents that out-of-towners are bringing the virus to the community.
Newel already closed beaches for a week around Easter weekend, hoping to stave off visitors when the pandemic was projected to be at its peak in California.
While people were compliant, many surfing organizations and other recreators said the short-time frame accounted for the minimal pushback.
Councilmember Renee Golder said she was concerned that measures to close beaches and parks hurt local residents by denying them important recreation activities beneficial to their well being.
“Schools are closed and kids are cooped up at home,” Golder said. “For the physical and mental health of the community, it is important to be able to recreate at the beaches.”
Gatherings at beaches continue to be controversial throughout the state. Gov. Gavin Newsom castigated beachgoers in Orange County over the weekend, but county officials maintain social distancing requirements were mostly followed.
Another 60 days
The city council also unanimously voted to extend the city’s state of emergency for another 60 days, which makes it easier for the city leaders to seek aid and financial assistance.
“We will do our best to shelter in place and continue to do our part,” said Mayor Justin Cummings. “We will follow the lead of the state, which has done extremely well.”
Santa Cruz County has fared relatively well during the pandemic, with 125 confirmed cases, 18 hospitalizations and two deaths as of Tuesday.
However, Santa Cruz County still does not even have enough testing capacity to test everyone with COVID symptoms, so numbers of confirmed cases are not a perfect measure of the virus’ spread.
Some commentators who joined the meeting online said the continued lockdown policies were not warranted given the muted nature of the pandemic in Santa Cruz.
“COVID-19 is not proving to be as dangerous as we were all worried about,” said Elise Casby, a Santa Cruz resident.
But many public health experts caution opening up too early could cause a rebound in infections prompting yet another round of shutdowns and economic setbacks.
Food Not Bombs
The city council also discussed the ongoing friction between city staff and Food Not Bombs, a local organization that distributes food to homeless people.
Some on the council expressed frustration that the organization and its leader Keith McHenry failed to hold their food distribution events in sanctioned locations in a manner consistent with social distancing.
“Staff has gone out of its way to work with Food Not Bombs while they are violating public health orders and putting the public at risk,” Mathews said.
Other council members were more willing to iron out differences between the city and the organization, noting that it was vital for homeless people to have access to nutritious meals in these challenging times.
“I hope that we can remember that Food Not Bombs is providing survival gear and food,” said Councilmember Sandy Brown. Brown said she observed Food Not Bombs adhering to social distancing restrictions during a recent distribution.
Susie O’Hara, assistant city manager, said the city has two hotels to accommodate homeless people exposed to the virus or who have underlying conditions. To date, no members of the homeless population have been confirmed to have contracted COVID-19, O’Hara said.
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Matthew Renda is a freelance writer who has garnered multiple awards for his reporting. His work has appeared in the Santa Cruz Sentinel, the Mercury News, CNET, CBS News, The Atlantic and Outside Magazine. He lives in Watsonville with his wife, Jessica, and their two children.