Desert Sun: Palm Springs projects $76 million shortfall due to coronavirus pandemic

By: , Palm Springs Desert Sun

Published: 9:44 p.m. PT May 11, 2020

Amid the coronavirus pandemic and related shutdowns, Palm Springs is anticipating a budget deficit of $76.4 million between the fiscal year that ends in June and the one that begins in July, according to a staff report issued Monday that outlines the stark reality of the city’s financial outlook.

Tourism revenue has helped build up the services in the city of Palm Springs over the past 15 years, with hotel bed and sales tax revenue paying for many of the amenities the city provides.

But the city’s financial fate and the future of services like the swim center, library and robust public safety are now closely tied to how fast the economy can recover. The city does not have sufficient unrestricted reserves to cover the anticipated shortfall.

Monday’s report was released in anticipation of a City Council meeting scheduled for Thursday where officials will review the figures and discuss their options. The city’s overall budget in 2019-2020 was $121 million, so the $29 million deficit anticipated for this fiscal year alone amounts to a 24% shortfall.

The city’s hotel tax revenue has more than tripled in the years since the last recession, from $12 million in 2009 to $37 million that was expected this fiscal year. This growth has fueled improvements in the city’s services—like the highest level of police officers among cities in the Coachella Valley, and the opening of a fifth fire station. That era of growth has effectively been halted by the virus, and personnel cuts are expected in both the police and fire departments, according to the report.

The report cautions that the estimates are subject to change. But “given the uncertainty of when the state and local economy will be able to open, which will likely be in phases over time, the process toward full recovery to pre-COVID revenue levels for the City will likely take months if not years,” the report warns.

Hence, the ability of Palm Springs to provide higher levels of services associated with a “full-service city” model is not sustainable given these unprecedented circumstances, the report warned.