The Avalon City Council unanimously approved the proposed budget for 2020-21 at the council’s Oct. 6 meeting.
To oversimplify: the city is going to have to spend some of its reserves to pay its bills.
“It’s going to be a long road back,” wrote Councilmember Michael Ponce in an email.
“Thankfully we have some visitation to the island but we certainly have a long way to go to recover to pre-COVID-19 revenues,” wrote Councilmember Cinde MacGugan-Cassidy.
“I am confident with due diligence and the guidance of Finance Director Matt Baker we will recover. I appreciate the solid finance team that understands we need to balance the budget with the limited revenues we project coming in. I am confident we will overcome the hardships ahead financially and look forward to working together the next few years toward recovery,” she wrote.
Finance Director Matthew Baker presented the budget to the council.
The budget priorities, according to his slide presentation, are to provide basic services to ensure public safety, minimize draws on reserves, repay debt and restore city fund balances to pre-COVID levels, and restore non-essential services to pre-COVID levels.
According to Baker, it could be years before Avalon restores services to the levels the community enjoyed before COVID.
He said the city will need to continue to look for revenue and to continue to reduce costs.
Baker showed a chart that clearly indicated expenses were outpacing revenues this budget year.
General Fund operating revenues and Harbor Fund revenues are down.
Baker was happy to report that nightly mooring revenues were $40,000 greater in September 2020 than they were in 2019.
“However, cross channel and cruise ship wharfage is down over $250,000, so it’s important to look at all the numbers to determine how we’re doing as a harbor,” Baker said.
Even if revenues for winter months were 100% of normal, the city would be looking at drawing money from reserves, according to Baker.
He said the city drew almost a million dollars from reserves in the fiscal year 2019-20.
The proposed budget draw $1.8 million from reserves in order to operate.
One of the challenges staff faced in creating the budget, according to Baker, is that more than half the costs were related to law enforcement or fire safety.
According to his slide presentation, the new budget is 82.7% of the amount budged in the previous fiscal year.
Baker focused on labor in reducing costs.
He said staff tried to find savings across all departments.
According to his slide presentation, the labor expenses for Fiscal Year 20 (2019-2020) were more than $10.8 million.
The proposed labor portion of the budget is more than $8.7 million.
The city also looked at contract services. More than half of those expenses relate to fire and lifeguard services.
In the Harbor Department, Baker said the city had been relying on visitor growth of 30% or more a year.
However, it does not appear likely that cruise ships will be returning to Catalina Island anytime soon. Baker did not include cruise ship wharfage in the budget.
“Until they come, I’m not really counting on it,” Baker said.
City Manager Denise Radde said the cruise ship requests that the city is getting now are for 2022. She was doubtful about cruise ships coming in 2021.
According to news reports, the cruise ship industry, industry is reducing the number of boats that will be in service.
Carnival Cruise Lines, for example, in a recent press release about third quarter earnings, reported it was getting rid of 18 “less efficient ships.”
That same night, following a public hearing, the council voted unanimously to approve extending an existing $1 roundtrip wharfage for four years.
The original proposal was for an indefinite extention. Resident Carl Johnson called for a sunset date. Councilmember Lisa Lavelle suggested a four-year extension.
However, Johnson objected and called for two years.
Councilmember Ponce said it doesn’t have to go to the sunset.
“I would like to revisit it every year,” Johnson.
Lavelle said she was perfectly fine with either two or four years.
What economic impact has COVID-19 had on you and your family? Email editor@thecatalinaislander.com.
