The sun is rising on a new season in the City of Napa as we begin to work toward recovery from the pandemic and start a new Fiscal Year on July 1. It goes without saying that Fiscal Year 20-21 was hard on everyone -- mentally, physically and financially -- and the entire nation is still trying to get our bearings and start to heal.
Throughout the pandemic, the City has been transparent about our financial situation and the solutions we were implementing to help us through the crisis. The City developed a budget webpage to answer any questions you may have had last spring when we realized the full financial impact the pandemic would have on our revenue. We continued to communicate through open letters, press releases, council updates and social media posts. In that spirit, Napa remains committed to being open and honest about the next fiscal year’s budget and how we are looking toward recovery.
After holding a Council Priority Workshop in February and a CIP & Operating Budget Workshop in April, the City Council adopted the FY 21/22 budget of $99.5 million on June 15. The adopted budget does not include potential increases from current labor negotiations. These costs will be added to the budget, once discussions are complete, and will be brought back to City Council for approval to add additional expense authority to the FY 21/22 budget. It is anticipated that the current revenue levels would be able to support the increased costs. Without the potential labor cost increase, the FY 21/22 budget is 8% higher than last fiscal year’s budget due to regularly-increasing costs for CalPERS, City utilities, contracts and internal services. However, this Fiscal Year’s budget also allows us to restore normal transfers to our Reserves, which we stopped at the onset of the pandemic.
Although still well short of our Transient Occupancy Tax (TOT) revenue prior to the pandemic, we are projecting a 58% recovery from last fiscal year’s actual TOT revenue, due mainly to the relaxation of COVID restrictions and the ability of individuals to travel to Napa for leisure. The City is also expecting our sales tax to grow by 4%. While these increases will greatly improve Napa’s revenue in the next year, the increase will still leave our TOT revenue down $6.5 million and our sales tax revenue down $900,000 compared to pre-pandemic levels.
Fortunately, the City is receiving $7.4 million in FY 2021-22 from the American Rescue Plan (ARP) granted by the federal government, which is acting as one-time aid to help bridge the gap between the City’s revenues and our rising expenses. We have also been able to supplement our General Fund with an additional $2.3 million from State funding called excess Educational Revenue Augmentation Fund (ERAF) revenue. Typically that funding would be budgeted in the Non-Recurring General Fund for one-time projects, but will be used for operations in FY 2021-22 to assist with still reduced revenue. With these one-time aids (ARP and Excess ERAF) and rebounding revenue levels, the City is creating a foundation for recovery as we move into FY 21/22 and into future fiscal years.
As always, Napa’s first priority is to ensure we deliver high-quality and essential services to our residents and community. Because we made the decision to keep over 80 staff positions vacant during the pandemic to offset our significant revenue loss and spare necessary funds, our staff has been stretched thin as they continue to do more work with fewer resources. We are using some of the American Rescue Plan funds to restore over 60 previously-vacant positions, which were strategically chosen to revitalize our service levels and provide relief to our hardworking staff.
I want to stress that, while we will not fully recover from the pandemic for several years, we are on the right track and will continue to strategically analyze our situation and adjust our plans accordingly. We believe our adopted budget will be a significant first step to Napa’s inevitable recovery.
Lastly, I want our residents to know that this recovery period will not be an idle one. The City Council and City staff have identified 90 projects we are focusing our efforts on in the coming year that will position Napa as a healthy, efficient and inclusive City for years to come. We are excited to keep moving forward and investing in opportunities for our residents to thrive in Napa. I will close by saying that I am always extremely grateful to the entire City of Napa staff and our wonderful community who continue to prove over and over how resilient this community is. Keep pressing forward.
City Manager, City of Napa
P.S. As we enter the next Fiscal Year, Napa will stay open and honest about our financial situation. You can subscribe to our emails or follow the @CityofNapa on Facebook, Instagram or Twitter to stay updated on our progress.