The city of West Hollywood’s retail and hospitality industries recovered at the end of 2021. (Beverly Press/Park Labrea News file photo)

The West Hollywood City Council Finance and Budget Subcommittee met on Jan. 31 to discuss the mid-year budget outlook for the 2021-22 fiscal year, and to discuss the living and minimum wage rate.

While the city is still expecting a revenue shortfall by the end of the fiscal year, the newly projected deficit is less than initially thought. The shift in estimations is due to an unexpectedly strong economic performance by the retail and hospitality industries from June 2021 to December 2021.

“We are improving our regular surplus or regular deficit from negative $6.9 million to negative $3.9 million,” budget officer Christine Safriet said.

The city had initially projected its year-end revenue to be $104 million, but is now adding $7.3 million to that estimate.

Although a strong increase in revenue was observed in the summer and fall of 2021 due largely to a bump in the travel and tourism industry, an analysis of December and January transient occupancy tax receipts showed a slowing of revenue.

“This is largely due to both the omicron surge, as well as some winter seasonality,” Safriet said.

A federal fund provided by the American Rescue Plan Act may offset some of this revenue loss by providing an additional $4.4 million to the budget, Safriet noted.

On the expenditures side, the city is expecting an increase from $111 million to $115 million. About half of that increase comes from supplemental approvals for transit fund purchases, consulting studies and council programs. The other half of the increase comes from a staff proposal to add funds toward social services, maintenance, property studies and Pride.

“Our reserve will shrink a little bit and our deficit has shrunk a little bit in terms of our budget,” Mayor Lauren Meister said. “That’s all positive, positive news.”

Additionally, there was discussion concerning the proposed increase to the city’s living wage rate. Currently, the living wage rate for employees with health benefits is $13.91 an hour and $15.16 an hour for those not receiving health benefits. The proposed revision would bump the wage rate to $19.35 an hour, regardless of employee health benefit status. The increase would cost the city about $1.2 million per year – to offset service contracts that would be impacted.

Regarding the implementation of the increased living wage rate, Meister raised concerns about social service providers’ ability to afford the wage hike.

“I assume a lot of our social services providers are nonprofit organizations, and I’m just wondering if we should consider … excluding them from the living wage ordinance,” Meister said.

Mayor Pro Tem Sepi Shyne opposed the mayor’s suggestion.

“I think when you’re working in Los Angeles County, nonprofit or not, you need to be going by the principles of the living wage, so people could make a living wage so they could live in L.A. County,” Shyne said. “I don’t really support doing an exemption for nonprofits, necessarily.”

City manager David Wilson then moved the discussion toward the already approved adoption of a new minimum wage of $18.40 an hour for the city, effective July 1. Wilson noted that even the increased minimum wage falls short of the proposed living wage and suggested having the living wage equal the minimum wage so that “everyone is on the same playing field.”

“Those [minimum wage] numbers increase … every year, so it would get to $19.35 probably in the next year or two, based on [consumer price index] increases for both the minimum wage and the living wage,” Wilson said

Shyne inquired as to how much funding would be set aside for mental health response units.

“My priority is to have these are fully funded,” Shyne said. “Mental health and homelessness are a priority for our residents and our city and it crosses with public safety.”

While the projected cost of the response units has yet to be finalized pending a staff report, Safriet gave a rundown of initial projections.

“The initial cost estimates provided in the initial update were about $1.5 million to $2 million for the startup costs and then up $2.5 million to $4 million of annual operating costs,” Safriet said.

The 2021-22 fiscal year budget update will be further discussed by the city council at the Feb. 22 meeting.