On June 16, the City Council adopted the City of Napa’s Fiscal Year (FY) 2020/21 Budget. The City had to make drastic reductions in expenditures and tapped Reserves to balance against our projected revenue shortfall due to the COVID-19 pandemic.
Based on available data, including historical revenue, industry projections, and state/national economic information, we project a shortfall of $20 million for FY 2020/21, which equates to approximately 20% of the annual General Fund revenue. Budgeting the use of $3.6 million in General Fund Emergency Reserves was required to close the gap.
We consider the recently adopted budget as a placeholder for a few reasons:
First: many of these budget-balancing measures are one-time savings offering short-term solutions that do not address the long-term financial consequences of the COVID-19 pandemic. For example, we cannot afford to continually tap the Reserves fund to make up for decreased revenue. We will also need to find a way in the future to refund projects that we have deferred and repay our reserves.
Second: there are still some unknown variables. In a bit of good news, the State of California will likely not cut our Vehicle License Fee (VLF) revenue this year. But we will not know the full revenue collected in FY 2019/20 until this Fall. We will closely monitor our close-out of FY 2019/20 and first few months of FY 2020/21 revenue – historically, the City’s busiest visitor season – so the City can thoughtfully assess our short-term and long-term impacts.
Last but not least: we acknowledge that our employees and bargaining units want us to gather and evaluate more information about the impacts of the pandemic. That way, we can better understand what the City is facing before the Labor Management Team regroups with bargaining units to discuss our financial situation and collaborate on potential solutions. We appreciate the many hours that City employees and bargaining units have put towards our discussions over the last several months, and agree that more data will help us identify meaningful short-term and long-term solutions.
The reductions we have adopted are deep and every Department and resident of the City will feel their impact. But this community is strong and resilient. I believe in our City’s leadership and value our community’s commitment to listening to one another. As history has proven, we, the City of Napa, will navigate our way through this difficult time together toward a bright and solvent future.
As City leadership continues to analyze our financial challenges for both FY 2019/20 and FY 2020/21, we will continue to provide our employees and the Napa community with informational updates. Please stay tuned to the City’s website at CityOfNapa.org, the Napa News email newsletter, and "cityofnapa" on Facebook, Twitter and Instagram.
Thank you again to everyone who has contributed to seeking solutions as we work through these hardships together. We will need to continue to work together to find long-term solutions to the unprecedented impacts of COVID-19.
Napa City Manager