The Avalon City Council held an emergency meeting on Thursday to get updates on the impact of the COVID-19 shutdown on the city’s finances, and the predictions are grim. City Finance Director Matt Baker presented the council with the numbers, the predictions and the suggested steps for addressing the loss in revenue.
Most businesses on the island have shut down operations and visitor counts are expected to slow to zero. Visitor driven revenue accounts for more than half of the city’s revenue, so without it, Avalon could only hold out for a few months before burning through its savings and becoming insolvent.
“We are, in a sense, living paycheck to paycheck,” Baker told the council.
The biggest uncertainty is the fact that there is almost no way to predict just how long the restrictions on travel and business operations are likely to continue. Like most other businesses on Catalina, the city relies on visitor-driven revenue for a large portion of its operating expenditures.
As limited taxes from visitors in February and March trickle in, the city can anticipate up getting to 25 percent of the revenue it usually gets in March and April. However, assuming a complete shut down in April, the city would miss out on approximately $425,000 in revenue in the month of May.
“The challenge with forecasting in this environment is that I really don’t know when to expect normalcy to return,” Baker said.
For now, the city will look for immediate ways to cut expenses, which will begin with staff furloughs, or layoffs. The city will also look at suspending any projects in the city that at not essential.
“We are evaluating all of that and that’s pretty immediate,” City Manager Denise Radde told the council.
Though she admitted it would not be a popular idea, City Councilmember Cinde MacGugan-Cassidy suggested the city look into possibly reducing some city salaries or potentially early retirement for some. She also asked about the city letting residents pay some city expenses with credit cards to reserve cash on hand. However, there are hurdles in that the city is not set up for credit card transaction on all its fees.
Yet the cuts in operating expenses are only enough to stem the tide and buy the city some time to find other forms of revenue. Those include short term loan options and applying for state and federal support, which Baker said the city was already pursuing.
“We cannot cut our way out of this situation,” Baker said.