City's financial strength will help in recovery, study says

The City Council heard a presentation on Tuesday night that painted a brighter picture for the city than many others in the state during the COVID-19 pandemic.

City Manager Gabriel Gonzalez said that Shafter’s financial strength prior to the health crisis has helped the city avoid many negative effects.

Gonzalez introduced Bill Statler, a budget advisor that has over 30 years’ experience as a finance director, 20 years with the city of San Luis Obispo and 10 years with Simi Valley.

Statler said that Shafter is in a unique position because of its balanced budget and large reserves in its General Fund.

“There are many, many cities in California that started this COVID-19 situation while already in a deficit situation or with a minimal amount of reserves in its General Fund, making this crisis something that greatly impacts its operations.

“Shafter is fortunate that they were in such a strong financial position before the current crisis, significantly reducing the impact on the city.”

Statler explained that Gonzalez and his staff had prepared a plan with seven key components as guidelines that can be used moving forward when drafting the city’s budget for 2020-2021.

In the immediate situation, they are recommending that the city instate a “hiring chill.”

“I wouldn’t call it a freeze, because there will be necessary hirings that can be dealt with on a case-by-case basis, to keep the essential services of the city functioning,” Gonzalez said.

The city will be observing a CIP project deferral. Capital improvement projects that are already in motion, having gone through the bidding process and had funds already secured for the project will move forward, with projects not yet further along in the process be reviewed to determine if they can be deferred.

They also recommended the use of a one-time use of reserves from the General Fund to maintain essential services in the city and to avoid layoffs of any regular full-time staff.

This does not include the employees working in nonessential services that have already been furloughed.

As for projections regarding the city’s economy, the city is not immune to the impact of the drastic drop in sales tax revenue localities will experience during this crisis. But Statler said that because a large share of the sales tax revenue generated by the city is produced by online retailer William-Sonoma, there is a cushion.

“Of course, the city will see a decrease in the amount of sales tax revenue produced, but with the help of William Sonoma, the situation will not be nearly as dire as in the majority of cities in the area.”

“In fact,,while the brick-and-mortar stores in the community will see a significant decrease in sales, William Sonoma may see an uptick in revenue due to consumers avoiding shopping at brick-and-mortar stores and electing to purchase more online.”

One item that will impact the city’s revenue for the coming year is the impending closure of the Shafter Modified Community Correctional Facility. The facility is tentatively scheduled to close in December 2020. But, due to the COVID-19 virus, the closure date may be moved up to an earlier date, said Statler.

The city will lose about $1.8 million in revenue, it is projected.

The next budget meeting will be held on May 12, to review of the budget and fiscal policies for 2019-2020. A preliminary budget is to be released for review on June 1.

The meeting on May 12 will be conducted virtually and can be viewed by those interested by going to Zoom.com. The meeting number to use will be in the meeting agenda on shafter.com.