Our community has been under a Shelter-in-Place Order, of varying scopes, for four months—one third of 2020 so far. It’s been a roller coaster of regulatory changes and we’ve all had to adapt and re-adapt. This week we had another change: the Governor announced a statewide re-closure of certain sectors of our economy (indoor dining, bars, wineries, movie theaters, zoos and museums, and entertainment centers). In the weeks ahead, more closures may occur given the rising COVID-19 numbers across the state.
Scotts Valley has risen beautifully to meet the public health threat. A look at the current COVID-19 data shows Scotts Valley with the lowest confirmed cases of any jurisdiction in the county. (There have been 12 cases ever in Scotts Valley, or 2% of total county cases, as of the time of this writing. To follow the latest health data, visit: www.santacruzhealth.org/coronavirus). This low number shows that Scotts Valley has exercised caution and acted responsibly. But there is no doubt that while our health outcomes are good, it comes at a cost. The very basics of how we conduct our lives changed overnight, upending the rhythms of our families, businesses, education and services.
The same upheaval holds true for the City of Scotts Valley. Since the first Shelter-in-Place Order on March 17, the City adapted in numerous ways. I’m writing today to provide an update on adaptations in the City’s budget and operations.
With the economic plummet from COVID-19, the City’s budget is again on uncertain footing. This is a step backwards from our expectations after the passage of Measure Z in March. Measure Z was crucial to stabilize the City’s budget and begin to address longstanding structural deficits that stripped City operations to bare bones.
The revenues from Measure Z were to flow into the General Fund and support a host of general operations. This includes improvements to streets, parks and storm drains, wildfire preparation, and the recruitment and retention of quality police officers to maintain Scotts Valley’s hallmark public safety services.
Unfortunately, just two weeks after Measure Z passed, our county fell under a Shelter-in-Place Order that effectively shuttered many of the businesses and hotels that produce vital tax revenue. About 50% of the City’s General Fund comes from sales tax and hotel tax alone, and both sources were dramatically reduced—in some cases to zero. In total, City revenue losses are estimated at $2 million in the fiscal year that ended June 30, a 16% loss in revenue. We are projected to fare only slightly better in the current fiscal year, with General Fund loses estimated of at least $1 million.
After discussing City finances over five Council meetings, the City Council adopted a responsible budget that relied upon drawing down reserves to the minimum two-month operating level, freezing positions for a savings of over $700,000 and cutting services and supplies. If Measure Z had not passed, the City would have reduced by another ~$1.5 million, which would have resulted in significant cuts to staffing and programs that our community treasures. Measure Z was intended to start the City’s journey to restoration. However, for this year, it served as a safety net to prevent catastrophic reductions.
Looking to the future, we see a steep hill to climb. The City will continually monitor our revenues and expenditures and report frequently to the City Council. The City is committed to responsible stewardship to weather the unknown future economic effects from the virus.
City Recreation Services
COVID-19 made its mark in another area of the City, forcing a heartbreaking decision to reduce staffing in the City’s Recreation Division. About 70% of City Recreation services are childcare, mostly around the school year. The other 30% are group classes, sports leagues and lessons. The Shelter-in-Place Orders closed schools, prohibited gatherings and disallowed most organized activities. The City closed its Community and Senior Centers. We were forced to cancel our 4th of July Fireworks, Festival and Parade. Unfortunately, we do not know what is in store for the future.
With just a trickle of revenue and uncertainty about future operations, City found it could not afford to maintain the same level of Recreation staffing. The Recreation Fund is a stand-alone fund, separate from the General Fund. It is intended to be fully user-fee-supported, although fees haven’t fully covered costs and General Fund subsidies are needed each year.
This summer, like many businesses that had to reduce staffing, the City made the hard decision to reduce its Recreation Division. The City will lose three staff members: our Recreation Coordinator and two Recreation Leaders/Site Directors. This is an absolutely wrenching decision and we know it will impact our community. The employees were connected to services and opportunities that may be available to them.
It’s important to know that although we had to reduce our staffing in these uncertain times, we are not leaving City Recreation behind. We are actively exploring ways to continue Recreation services that are compliant with Public Health Orders, safe for our attendees and providers, and cost-effective for the City to operate.
In other areas of the City, we are working to enhance our contactless services for the safety of the community and staff. We continue to do our best to support the day-to-day business of the community, and we thank you for your flexibility and patience under the circumstances.
Our City is also active with support of local business. The efforts of the Local Business Recovery Council Subcommittee, all City Council members and the Scotts Valley Chamber of Commerce resulted in more resources, information, connection and advocacy to support the recovery of our business community. These efforts will be reinforced as we move deeper into the COVID-19 crisis.
All in all, adaptation is the word of the times and the adaptations have not been easy. The City adapted its budget and operations to responsibly weather these difficult times. The community has done the same, creatively and nimbly. On behalf of the City, I extend our gratitude for your efforts to keep the community strong.
Tina Friend has been the City Manager of Scotts Valley since June 2019. She has over 17 years of local government experience, and has worked within the full range of municipal services. She holds a JD from Santa Clara University School of Law and an MPP from Georgetown University.