The arrival of COVID-19 (coronavirus) has turned our world upside down. Unlike some other natural disasters the city has faced, there was no playbook for us to work through. We took quick actions to protect our employees and the public while complying with the county’s health orders: we closed public counters, started holding public meetings remotely, and directed employees to telework.
The city's financial situation
When the first Shelter Order came out, we watched our streets empty and our local economy come to a virtual standstill. All of a sudden, the city was simultaneously dealing with both a health crisis and an economic crisis. The city of Napa relies heavily on Transient Occupancy Tax (TOT)/Hotel and Sales Taxes, both of which were decimated by the Shelter Orders. Immediately, we began addressing the projected $10-plus million revenue shortfall we were facing during the fourth quarter of fiscal year 2019/2020, which ends on June 30.
Based on our available data--including historical revenue, industry projections, and state/national economic information--we project a shortfall of $20 million for FY 2020/2021, about 20% of our annual General Fund revenue.
Unfortunately, the state of California has now notified Napa County and its jurisdictions of the possibility of reducing funding in a key area that we rely on for continuous revenue: Vehicle License Fees (VLF). The reduction in revenue from VLF will likely result in additional millions of dollars in revenue reductions for us in Napa this year.
As your city manager, I have an obligation to manage city resources, to plan and oversee the activities and operation of the city, to serve the community and employees, and ensure the city's near-term and long-term financial stability. The entire city leadership team's goal is to mitigate the damage to our local economy while also protecting the health of our residents and the well-being of our staff. We are basing every decision we make on careful examination of the most reliable data we have available.
Our city has already taken numerous steps to meet the current fiscal year's more than $10 million shortfall without impacting any current employees. The City Council has approved budget reductions, such as suspending all non-essential expenditures, freezing the hiring of vacant positions, using emergency reserves, deferring equipment replacement contributions, and defunding capital improvement projects (those are "one-time" reductions).
Now, it is our duty to find solutions to the projected revenue impacts for the next fiscal year.
We are listening
Throughout my 30-plus years in public service, I have learned that listening to people is one of the most important things I can do. By listening, we can understand; by understanding, we can act to change course for the better and solve problems. Given that the city’s most valuable resources are the city employees who serve our community, I have been listening to comments that have been made by and on behalf of city employees.
In the past two-plus months, the city has met over 30 times with the unions that represent city employees; and in response, we have provided a substantial amount of information to help all parties understand our current budget issues. Our goal is to work collaboratively between city managers and the employees’ union representatives about potential cost saving measures to respond to the decrease in revenue.
During a May 5 budget workshop, there was significant discussion about making changes within the Parks and Recreation Department, such as leaving positions vacant, moving offices into city-owned facilities, bringing the Parks and Trees Division to Public Works and the Recreation Division to Community Development, as well as proposed layoffs. Given how much our community loves our Parks & Recreation programs and employees, it was no surprise when I heard from community members asking the city to reconsider the proposed cuts. It was also clear there was misinformation spreading: namely, that these cuts had already been decided (they have not) and that our Parks and Trees Commission would be dissolved (it will not).
I am listening, city leadership is listening, and your City Council is listening. We all take our public service obligations seriously and are committed to this community. Together, we must determine the best path forward for our community, our city, and our valued employees. For example: the current public health orders present a significant challenge to our recreation and senior programs. These restrictions are changing frequently, but we know we will need to be as creative as possible to continue providing services, and that things will not be the same as before.
With the uncertainty of the recovery of the economy, the City Council has directed us to take a step back to re-evaluate our situation. In particular, the City Council has asked city management to continue working with our employee unions to seek concessions and use additional reserves to help offset layoffs. While these discussions with employee union representatives are ongoing, we will pause the process for employee layoffs for now. The Management team will work directly with union representatives for the next steps in discussions.
Thank you to everyone working toward solutions
We are thankful for our employees, council members, executive team members and represented union members who are making sacrifices (including compensation cuts) to help their co-workers and the community they serve. I would also like to thank those who have focused on solutions and personally shared their thoughts with me.
The city will discuss the fiscal year 2020/21 budget at a Special Meeting of the City Council on Monday, June 8 at 6:30 p.m. in city Hall Council Chambers at 955 School St. The city will continue to monitor and discuss budget issues as we learn more from the state of California and re-engage with our employee unions.
It has been an emotional time with a lot of stress and anxiety for everyone involved in this year's budget process. My hope is that, as an organization, we will support a culture that values each other’s contributions to our community. This is what has made me proud to be a city of Napa employee for over 30 years and what makes us the special people and place that we are.
Napa City Manager
Editor's note: This item has been updated to correct outdated language in the "We are listening" section.
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