ANAHEIM, Calif. (June 9, 2020) — Anaheim’s initial proposed budget for the upcoming 12 months continues to provide for our community while reflecting the potential impact of the coronavirus crisis on the city’s finances.
The proposed budget, which is subject to update with the gradual reopening of Anaheim’s economy, projects a $75 million shortfall for the general fund, Anaheim’s main source of day-to-day public safety, community services and other operational funding.
The proposed budget covers the 12 months from July 2020 through June 2021.
From where we stand today, annual general fund revenue is projected at $344 million, down 22 percent from a year earlier.
Total general fund spending, including for city services, debt service and capital projects, is projected at $428 million, down 4 percent from a year earlier.
The gap between projected general fund revenue and spending is $84 million, prompting a currently proposed 20 percent reduction in spending, or $75 million.
The remaining projected deficit of $8.8 million is related to homeless services that may be covered by state and federal grants.
The city will face decisions about balancing its budget for the 2020-21 fiscal year.
With a coronavirus-driven revenue shortfall that began in March, Anaheim has already taken cost-cutting measures, including:
- A freeze on non-essential spending
- A freeze on hiring
- Deferred vehicle purchases
- Use of reserve funds
For the upcoming 12 months, the level of cost cutting necessary depends on a reopening and rebound in Anaheim’s economy, which is largely driven by visitors to our theme parks, convention center and hotels.
In a normal year, revenue from hotel stays makes up about 40 percent of Anaheim’s general fund revenue.
For the upcoming 12 months, hotel-stay revenue is currently projected at 24 percent at $84 million.
That would be down 30 percent from an estimated $120 million for the 12 months through June 2020, which saw a sharp coronavirus-related drop-off starting in March and is expected to continue through June.
For comparison, Anaheim’s hotel-stay revenue for the 12 months through June 2019 was $163 million, nearly doubling from 2011.
We expect to see Anaheim’s hotel-stay revenue rebound in 2021 and 2022 and surpass 2019’s level in 2023 and beyond.
Anaheim’s other two major general fund revenue sources are the city’s share of California’s sales tax and its share of Orange County’s property tax.
The city’s share of sales tax, which is 1 percent of Orange County’s 7.75 percent rate, is projected at $76 million for the 12 months through June 2021.
That would be down 5 percent, due to coronavirus-related impacts on retailers, restaurants and other businesses that generate sales tax.
Sales tax typically makes up about 20 percent of Anaheim’s annual general fund and is projected to be roughly consistent at 22 percent for the upcoming 12 months.
Even with a projected decline, sales tax is expected to make up a larger share of the general fund with the falloff in hotel-stay revenue.
The city’s roughly 20 percent share of the county’s 1 percent property tax is projected to be higher, at $86.5 million, as property values have been least impacted by the coronavirus downturn.
Property tax typically makes up 19 percent of Anaheim’s yearly budget and is expected to be 25 percent for the upcoming 12 months. The larger percentage it makes up in the general fund is also attributable to the falloff in hotel-stay revenue.
Anaheim’s proposed budget will be shared with Anaheim’s City Council in a workshop on Tuesday, June 9.
An updated budget is expected to be presented in coming months, when Anaheim has a better idea of the evolving revenue impact of reopening theme parks, the Anaheim Convention Center, hotels, retail and other businesses in our city.
Anaheim and all of Orange County appear to be moving into stage 3 of California’s four-stage reopening plan based on new guidelines released this week. Stage 3 allows for the reopening of theme parks, hotels, sports without fans, breweries, wineries and bars as well as other businesses.
For now, here’s a deeper look at the proposed budget. All figures are projections that are subject to change.
BY THE NUMBERS
Anaheim’s total overall city budget. It includes the city’s general fund for day-to-day services, a capital improvement program for big projects, and enterprise funds for the city’s water and power utility, the Anaheim Convention Center, golf courses and other facilities. Anaheim’s overall budget for fiscal year 2020-21 is down 4 percent from the prior fiscal year.
Anaheim’s enterprise funds. They cover city operations that collect revenue for providing services to customers. These include Anaheim Public Utilities, the city’s not-for-profit water and electricity provider, and Convention, Sports & Entertainment, which runs the Anaheim Convention Center and oversees Honda Center, Angel Stadium of Anaheim, City National Grove of Anaheim and the ARTIC transit center.
Enterprise funds make up the largest portion of Anaheim’s overall budget, with nearly all of the money they generate going to offset the expense of their operations or to fund improvements. Residents benefit from reliable electricity and water service and rates that are lower than in surrounding cities. Residents also benefit from visitors who come to Anaheim for conventions, sports and entertainment and spend money on hotels, shopping and dining.
Spending in enterprise funds is down 3 percent from the prior year.
Anaheim’s general fund. This is the city’s main source of money for day-to-day operations and covers spending on staffing and offerings at parks, libraries and community centers as well as public safety and other city services. The general fund is down 15 percent from the prior fiscal year.
Anaheim’s capital improvement program. The capital improvement program funds upgrades to parks, roadways, sewers, landscapes, electric and water systems and more. The program is funded in some cases by enterprise revenue or by outside sources including the state’s gasoline tax, a portion of sales tax for transportation, federal Community Development Block Grants, developer fees and other sources. The capital improvement program is 17 percent lower than the prior fiscal year and can vary year to year based on current projects and what stage they are at.
Anaheim’s ending reserve balance for fiscal year 2019-20, equal to 5 percent of general fund spending. The reserve fund is expected to decline to $9 million during the upcoming fiscal year, equal to 2 percent of ongoing general fund spending.
Parks, libraries, community centers
Despite budget challenges, Anaheim projects spending $3.1 million to enhance parks, libraries and community centers for the 12 months through June 2021.
Included is a dog park at Maxwell Park in west Anaheim, set to be built in coming months and opening in late 2020.
Other spending will go toward development of a park next to the Downtown Community Center, a youth entrepreneurial center downtown, upgrades to parks and libraries, early work on an educational outdoor laboratory at Oak Canyon Nature Center and a teen room at Brookhurst Community Center.
Streetlights, electricity, water
A combined $70 million in spending is proposed to improve and maintain the electric and water systems of Anaheim Public Utilities.
Undergrounding of overhead electric lines will continue with $10 million in spending across Anaheim for added reliability and improved scenery along streets in our city.
More than $8 million is set to be spent improving equipment at electric substations, which transform high voltages of electricity for use in homes and by businesses.
More than $7 million is set to be spent replacing main lines in our water system that bring water to our homes and businesses.
Streetlights in our city will continue to be converted to brighter, energy-efficient LED lights with $4 million in spending as part of an ongoing upgrade program.
Anaheim Public Utilities will also continue to work with schools to add renewable solar energy generation on campuses with $1 million in projected spending in the ongoing program.
More than $70 million is set to be spent improving streets, bridges and sidewalks and coordinating traffic signals across Anaheim.
Projected spending includes new asphalt on sections of Ball Road, Broadway, Euclid Street and Orangethorpe Avenue, the widening of Brookhurst Street from Cerritos Avenue to Guinida Lane, the widening of Katella Avenue along the Anaheim Convention Center, as well as sidewalk, curb and drainage improvements across the city.
You can read more about Anaheim’s proposed budget here.