City Slashes Spending to Prevent $12M Budget Shortfall

Laguna Beach anticipates a $12 million coronavirus-induced budget shortfall unless expenditures are slashed, prompting deep cuts in employees’ hours this week and delays to city projects.

City administrators outlined the cuts Tuesday during a virtual meeting of the Laguna Beach City Council. The reduction in employees’ hours is expected to save the city about $79,750 per week, according to city documents. City administrators are also keeping nine full-time positions vacant and continue to contract an interim director of public works.

The cuts will be particularly hard on Community Services and Public Works departments, where full-time employees have seen their hours reduced by 67% and 34% respectively, according to city documents. Part-time employees in these departments have seen their hours entirely or nearly all reduced to zero.

“We must assure the continuity of police, fire, and marine safety services during this pandemic,” City Manager John Pietig said. “Mutual aid might not be available from surrounding cities because they will be going through the same things.”

The Community Services Department oversees programs and services offered at the Community and Susi Q Center as well as city parks and other recreational facilities. Laguna Beach closed all city facilities to the public through at least April 30.

One of the factors driving these costs is the steep decline in overnight guests at Laguna’s hotel. Hoteliers collect the equivalent of 14% of the nightly cost of a room for city revenues, including the 2% tax for essential services approved by the voters through Measure LL.

Hotel tax revenue is down by 45%, according to a city staff report. It’s unclear when visitors will fill Laguna Beach hotels again and city leaders must trim its budget accordingly to maintain essential services and avoid dipping into its reserves and disaster fund, Pietig said.

The General Fund is on track to collect $6 million less than expected for this year, a decrease of about 8.5%, according to a city staff report. Parking revenues are also anticipated to be down by $1 million or about 14%.

“I think we’re in for a hell of a bad time here,” Councilmember Sue Kempf said.

She added that line items unrelated to public safety and economic stimulus are not important to her right now.

“We’re cutting people’s hours,” Kempf said. “We could be laying off people. So we need to be very careful about how we do this.”

In response to a letter from Visit Laguna Beach, the City Council unanimously voted Tuesday to defer the hotel’s first quarter tax payments for six months. Gavin Curran, director of administrative services, said this extraordinary measure is unprecedented, at least his 16 years working for Laguna Beach.

“We are pleased the City Council voted to allow our hotels to defer [transient occupancy tax] payments as many of them have had to make extremely difficult decisions: having to reduce staffing for payroll concerns, and even considering the closure of their operations,” Ashley Johnson, president and CEO of Visit Laguna Beach, said in a statement. “We’re hearing from even the strongest ones, that they are having an unprecedented time making ends meet.”

After consulting with department heads, the city is delaying dozens of projects, studies, and major purchases, Curran said.

In their speedy effort to present council members with options, city administrators proposed withholding $284,700 in grant funding from the Laguna Beach Playhouse and another $165,200 from the Laguna Art Museum, according to city documents.

Both of these ideas were quickly withdrawn after the nonprofits’ leaders told councilmembers that they had already spent the money on building renovations based on promises by city officials.

“Those expenditures were made based on relying out our commitments,” Mayor Bob Whalen said.

Among the other projects deferred—but not eliminated by the Council on Tuesday—was the planned restoration and removal of sludge from the New Deal-era sewage digester building in the Village Entrance. They also decided to delay purchasing the South Laguna Community Garden, which has taxpayer-funded contribution budgeted at $500,000.

Carly Sciacca, a long-time volunteer at the Community Garden, said she was shocked that city staffers would even consider the garden’s purchase as expendable after the City Council agreed to move forward.

“The thing that’s bothering me most, truthfully, is the city seems to be taking advantage of our limited rights, our fears, sickness and vulnerabilities at a time it should be protecting its citizens,” Sciacca said.

Mayor Pro Tem Steve Dicterow said Thursday that he disagreed with Sciacca’s take on the transition to virtual meetings.

“I think that is so extremely off-base that it shocks the conscience,” he said. “We are doing everything we can to protect the public. She clearly did not understand what the process is about.”

As for the argument that community members are too busy dealing with coronavirus’ fallout to participating in the legislative process, Dicterow said, “people are capable of multi-tasking.”

Dicterow added that he remains supportive of the digester and community garden.

“I wasn’t physically at the meeting, only Peter [Blake] was, but everybody who wanted to was able to call in,” he said.

Laguna Beach citizens should expect councilmembers to do more than one thing at the same time, Johanna Felder, president of Village Laguna, said in a statement.

“Their function is not only to think about public safety and economics on the one hand, but also to think about the general peace and welfare of our residents, their constituents, on the other,” Felder said. “The historic … Public Works Administration digester is a community landmark, neglected for 40 years. After hearing the council finally voted unanimously on restoring it.”

She suggested the city use $2 million recently committed to the Downtown Action Plan to help pay for these projects.

The City Council is scheduled to meet virtually at 5 p.m. on April 21.