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Watsonville
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February 28, 2021

City budget buoyed by sales tax revenue ‘bubble’

WATSONVILLE—Despite the economic shutdowns resulting from the Covid-19 pandemic, the city of Watsonville’s overall sales tax revenues have held steady thanks to a myriad of reasons, including a sharp rise in online and local shopping.

That’s according to Administrative Services Director Cindy Czerwin who at Tuesday’s City Council meeting provided yet another rosy budget update.

Czerwin is predicting the city will end the 2020-21 fiscal year about $5 million better than originally budgeted back in June 2020 and only slightly below prior years. Because of that, Czerwin recommended the City Council use about a half-million dollars in unexpected revenues to help various departments that are struggling to operate on the thin budgets approved by the council last year.

Those appropriations, which passed 6-0 with councilwoman Ari Parker absent, included about $270,000 to cover overtime costs from the fire and police departments, both of which have been dealing with staff turnover and multiple vacant positions, Cerwin said.

A long-running issue for the city, firefighter overtime costs are expected to fall as a new crop of recruits completes its training at the academy and joins the unit, said City Manager Matt Huffaker.

“The challenge with hiring any of our firefighters is that it’s a long process,” Huffaker said. “We’ve got some great candidates that are moving through the pipeline that are local, from Watsonville, which we’re excited about.”

Despite the good news, Czerwin said that there are still many unknowns about the coming months such as the speed of the vaccine distribution and whether people will return to their pre-pandemic spending behaviors.

Watsonville is currently receiving a larger than usual share of the county’s sales tax revenues because Santa Cruz and Capitola have seen a drastic decline in revenues as their tourism industries have been largely sidelined by stay-at-home orders. Meanwhile, Watsonville’s sales tax revenues—according to data through Sept. 30—have inched closer to their pre-pandemic levels, Czerwin said.

“We’re riding this little bubble of other people’s hurts,” Czerwin said. “We don’t expect this to last forever. At some point, things will settle back down and our share of the pool will go down. People will start shopping elsewhere again.”

The City Council also approved its budgetary report from the 2019-20 fiscal year and the independent audit of Measure G (Y) funds.

The former showed the city ended the year with a $16.5 million general fund balance, a number that is 35 percent above its operating expenditures. Because the city’s policy—approved in 2017—is to have a minimum fund balance of 20 percent above its operating expenditures, Czerwin said the City Council is at a point where it should be using some of that cash for capital improvement projects and mounting CalPERS costs.

City staff will present the City Council options of how to spend those funds during budgetary hearings in June.

Tony Nuñez
Tony Nuñez
Managing Editor Tony Nuñez is a longtime member of the Watsonville community who served as Sports Editor for five years before entering his current role in 2019. A Watsonville High, Cabrillo College and San Jose State University alumnus, he covers the city, business, housing, entertainment and more.

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