West Hollywood’s fiscal situation is relatively stable despite the ongoing pandemic, city leaders said. (photo by Cameron Kiszla)

Though the coronavirus pandemic continues to affect the city, West Hollywood officials touted the city’s response to COVID-19 during the Nov. 16 council meeting.

The city staff report noted that the city ended fiscal year 2020 on June 30 “on solid ground,” with general fund revenues exceeding the budget, which had been adjusted to account for COVID-19, by $7 million, or 7%. Though expenditures exceeded the budget by $5 million, or 5% – including “nearly $1 million in emergency expenditures” – reserves were able to cover the $1.1 million deficit.

For the current fiscal year, which began on July 1, the city is expecting a larger budget deficit – $4.8 million – which will be covered with reserves, City Manager Paul Arevalo said.

“Simply put, our revenues as expected are down, nearly $25 million. Our budget for last fiscal year was $115 million in general funds. This year, we’re looking at a $90 million general fund budget, so that’s a $25 million dip. We’ve reduced our expenditures by $20 million. We’re drawing down on emergency reserves of $5 million to close the gap and provide services to the community.

Aravelo noted that one of the challenges for the fiscal year 2021 budget is $2.8 million “in emergency funds that have been used to provide support to our community,” but the city is also facing revenue challenges. For instance, the city’s transient occupancy tax – or hotel tax – revenues for the first quarter of fiscal year 2021 were down 64% as compared to last year, and with the economic downturn, sales tax is a challenge “as expected,” Arevalo said.

“With the stay-at-home orders, a lot of our businesses have been shut down or the retail activity has been reduced significantly. Travel is down, hotels are struggling not only in West Hollywood but throughout the world,” Arevalo said.

Some good news, however, was the passage of the 0.75% sales tax increase Measure E by voters on Nov. 3, which Arevalo noted was “much needed” and passed with the support of more than 70% of West Hollywood voters.

“It’s going to be a wonderful addition, especially during the COVID times. In a solid year of revenues, it would be somewhere around $10 million in revenue. Because of the downturn in the economy, it will be less than that, but at the same time, it’s something to be really grateful that we have the support of the community on that particular tax,” Arevalo said.

The council did not discuss the budget as a separate item on Nov. 16 and instead received the budget update as part of the consent calendar, though Councilman John Duran used a portion of his comments to thank city staff for their work on the budget.

“I think many of us were concerned about the impact that COVID and the economic collapse would have on the city of West Hollywood, but it has been their skillful management of resetting revenue expectations, resetting expenses, making sure the budget was balanced, tapping into our reserves, bonding out cash, that we’ve got a very I think positive update tonight,” Duran said.

Duran also noted that West Hollywood is “in a lot better shape than so many other cities across Los Angeles County,” some of whom may even have to file for bankruptcy, and West Hollywood is “not in that position.”

“Because we’ve got a very strong, strong fiscal manager as our city manager, and [Assistant City Manager] David Wilson and [Senior Management Analyst] Christine Safriet … we can all breathe a sigh of relief, we’re going to be OK,” Duran said.

Duran also noted that with President-elect Joe Biden’s victory in the Nov. 3 election, he is hopeful that Democrats in Washington, D.C., can provide more relief to local governments than could have been expected if President Donald Trump was reelected.

“The Biden administration can’t come soon enough. I know that Speaker Pelosi and others are fighting for revenues to come to local and state governments, including ourselves, which would be really, really helpful,” Duran said. “There’s lights at the end of the tunnel.”