City faces $22 million loss due to COVID-19, considers implementing hiring freeze

City faces $22 million loss due to COVID-19, considers implementing hiring freeze

Photo Credits: KATHERINE FRANKS / AGGIE

After grim economic forecasting, city must cut costs but remains hopeful for future, citing “resilient” community

At a May 5 special meeting, the Davis City Council viewed a presentation assembled by Management Partners about the city’s financial status as well as long term economic forecasts as a result of COVID-19. Councilman Dan Carson summarized the expected future losses.

“These are very serious problems that the city of Davis faces — the current estimate is that over four fiscal years, we would face a revenue loss of about $22 million,” Carson said.

To save money in the short term, the presentation recommends that the councilmembers freeze hiring and cut “50% of positions that become vacant in one year” and either temporarily reduce pay or defer the cost of living adjustments for employees. 

Carson explained the importance of reducing staff as employee-related costs represent a significant portion of the city’s budget. 

“A very large part of our general fund operations is people — benefits, healthcare and other things — and we’re going to see if there are any opportunities to reduce cost there,” Carson said.

Management Partners also recommended lowering city contributions to previously-approved projects including the Nishi Gateway and the West Davis Active Adult Community. 

The city will most likely not cut costs by postponing work on roads and bike paths. These issues grow worse with time, Carson said, and it’s cheaper, in the long run, to fix them quickly. 

“We want to prioritize maintaining things like roads and bike paths, because we know if you put off fixing those things, it makes them significantly more expensive down the line,” Carson said. 

City staff released a staff report detailing the reasoning behind taking such drastic measures to save money, describing how that COVID-19 crisis has caused massive drops in gross domestic product (GDP). 

“The impact of the pandemic has been unprecedented on not just the City of Davis, but on the US and the State’s economy,” the staff report reads. “The gross domestic product (GDP) declined 4.8% in the first quarter of 2020, and is expected to decrease 30-35% in the second quarter, when the full force of the economic shutdown will be reflected.”

Carson acknowledged that the stay-at-home orders issued because of the pandemic and UC Davis’s transition online have caused much of this economic downturn but still believes these cautionary measures were necessary for public health. 

“I would definitely say that the shelter-in-place orders have had a significant impact on the economy of the City of Davis,” Carson said. “We understand the reasons for these actions — lives are at stake, so this isn’t a criticism. We’re also happy that UC Davis has taken serious steps to allow students to take the spring quarter classes remotely. But by having taken those actions, those cash registers aren’t ringing as much in Downtown Davis.”

Despite the grim forecasting, City Manager Mike Webb remained confident in the city’s ability to get through this crisis during the city council meeting

“I think one of the realities is that it’s going to take multiple measures to mitigate the revenue loss impacts,” Webb said. “Some of these decisions are not going to [be] easy ones — they are really going to require a shifting of mindset, […] but I think it’s quite doable. And I think we’re very fortunate in that our community is very resilient.”

Carson felt similarly hopeful for the future and was confident that the Davis economy will bounce back as soon as it’s safe enough to lift pandemic-related restrictions. 

“It’s important that we take the steps that will keep us healthy and safe, and when we’re able to fully reopen our economy, I’m quite sure we’ll be able to rev up our local economy,” Carson said. 

Written by: Eden Winniford –– city@theaggie.org