Healdsburg offers small business loans, braces for $3 million budget shortfall

Healdsburg is launching a loan program to help its small businesses survive the impacts of the coronavirus pandemic, which already has created a more than $3 million shortfall in the city’s budget.

The city, which is heavily reliant on tourism to support its economy and its municipal budget, has experienced a sharp drop in visitors during the stay-at-home order. City staff expect it will lose nearly $1 million in projected sales tax revenues and more than $2 million in taxes tied to hotel guest stays through the end of June.

Both may only be a sign of what’s to come.

“We don’t know the full impact of this, and things could change quickly,” Heather Ippoliti, the city’s finance director, told the City Council last week. “We really don’t know how long this is going to go. The longer it goes, the numbers will change.”

Over the next two years, California cities are bracing for at least $6.7 billion in lost tax revenues due to the public health crisis, and the figure will grow dramatically if stay-at-home orders are extended into the summer, according to an analysis by the League of California Cities. In Santa Rosa - Sonoma County’s largest city - a city consultant projected an immediate $32 million shortfall, including $12 million through June and $20 million more during next year’s budget cycle without federal assistance.

Healdsburg anticipates local tax revenues will fall $3 million short of projections used to create its budget for the fiscal year ending June 30, forcing the city to dip into its reserves.

The city’s general fund is expected to lose almost $1.5 million in tax revenues, creating a shortfall equaling about 10% of the fund and nearly 2% of the city’s overall budget. The city’s Community Services Department, which oversees parks and recreation, stands to lose almost $1.4 million as well, while a voter-approved city housing fund will lose more than $425,000, according to the forecast.

To offset the shortfall, the Healdsburg City Council will pull $1.1 million from its reserves - a sum equal to a quarter of its rainy-day fund - and attempt to save money by freezing unfilled positions for the remainder of the fiscal year.

Looking ahead, the council voted 5-0 to bolster its general fund reserves by moving $450,000 from a voter-approved tax dedicated for public infrastructure, public safety and economic development. Placing the Measure V revenues into the general fund reserves will ensure its police and fire departments are fully funded in the upcoming years, according to City Manager David Mickaelian.

Even as it struggles to fill holes in its own budget, the city is creating a new program that will offer $600,000 in no-interest loans to businesses within city limits. It will be funded with $400,000 from Measure V and another $200,000 freed up by the council’s decision to defer construction of a crosswalk at Sherman Street.

The loan program gives preference to companies that applied but were unsuccessful in receiving a federal emergency loan, and those businesses that continue to pay employee wages and benefits.

“I don’t think we can separate the city from our businesses,” Vice Mayor Evelyn Mitchell said during last Tuesday’s livestreamed meeting. “I think the sooner our city businesses get back, the sooner the city gets back.”

Under the program, restaurants, retail and service-oriented businesses of five or fewer employees can apply for up to $5,000, which would offer a three-year repayment plan.

Companies with no more than 25 workers may apply for a maximum of $15,000, which would be repaid over a five-year term. The program kicked off last Friday on the city website, with applications due on April 30 and money expected to be distributed by the second week of May.

“It’s important to take decisive action quickly. I consider it an investment in the revenue sources that fund the city,” said Councilman Joe Naujokas. “However, I’m looking forward in the next budget cycle to having a more strategic view on how we can invest in our businesses to recover in the long term.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.

EDITOR’S NOTE: This story has been updated to correct the amounts of Santa Rosa’s projected revenue lost for the current and upcoming fiscal years.