Cathedral City to Declare Fiscal Emergency

CATHEDRAL CITY — Amid plunging revenues caused by the coronavirus pandemic, the Cathedral City City Council on Wednesday, July 22, will consider a resolution to declare a fiscal emergency.

The financial losses are due in large part to Gov. Gavin Newsom’s “Emergency Stay-at-Home Order” on March 19, 2020.

The coronavirus pandemic and the resulting economic recession have resulted in dramatically reduced revenue to the Cathedral City. During two special council meetings in June, the City Council approved budget reductions of approximately $8.3 million to the FY20-21 budget and approved the drawdown of nearly $6 million in reserves to balance the FY19-20 and FY20-21 budgets, according to City Manager Charles McClendon.

“(The declaration) will hopefully help us when we talk to county, federal, and state officials about the need for financial assistance to reinforce how serious our budget situation is,” Mayor John Aguilar told Uken Report. “At some point, it may be requested so we wanted to ensure we had formally acted on it.  Also, kudos to Mayor Pro Tem (Raymond) Gregory who pushed for the Resolution to be presented to Council.”

The economic recession and resulting reductions in revenue to the city have already required budget reductions, personnel cuts and spending reserve funds. Additional loss of revenue will make it increasingly difficult for the city to meet its financial policies regarding reserve funds and other practices integral to sound financial management, according to McClendon.

The City Council first raised the possibility of declaring a fiscal emergency during its meeting on July 8, 2020. A formal declaration may not provide any additional powers or legal protections to the city, but it will certainly serve to emphasize the economic realities of the current situation and help explain the need to take action to protect the financial strength of the city, according to McClendon.

The worldwide COVID-19 Pandemic has forced business closures, reduction in commercial activities, restricted trade, travel and tourism, and high unemployment, the combination of which has severely impacted the economy and reduced tax and fee revenues to Cathedral City.

The global COVID-19 pandemic has resulted in unemployment in the United States ranging as high as 15%, the highest level since the Great Depression, has led to reductions in U.S. consumer spending by approximately 20%, the closure or at-risk-of-closure of approximately 7.5 million small businesses in the US, and a projected reduction in US gross domestic product by approximately 6% for 2020, according to a staff report.

The federal stimulus bills, including the CARES Act, did not provide any direct assistance to the city of Cathedral City because it has a population under 500,000, leaving the city to request financial assistance from its state and Federal representatives. The city has not yet received any aid or any confirmation thay aid is on the horizon.

Cathedral City is not alone making such a declaration.

The Palm Springs City Council in April declared a fiscal emergency.

And, facing an estimated $54.3 billion shortfall, California Gov. Gavin Newsom in June declared a “budget emergency” for the first time so the Legislature can pull from the state’s savings account to balance a spending plan that includes cuts for colleges, courts and state worker salaries.

The move ensures the Legislature can take nearly $8 billion from the state’s primary savings account to avoid even deeper spending cuts amid an economic downturn caused by the coronavirus and stay-at-home order that has prompted more than 6.7 million Californians to file for unemployment benefits.