Less than a month after California began a mandated COVID-19 shutdown, Grass Valley was well on its way to implementing a budget revision designed to weather the coming economic storm.

On April 14, the City Council unanimously approved the revisions and recommendations to lay off some city staff positions and freeze hiring for others.

“We know the world has changed, with COVID-19 going to have a major impact,” said City Manager Tim Kiser. “I like to use the analogy of a hurricane. … We know this is coming, and we need to take action now.”

The budget revision, put together by Finance Director Andy Heath, projects a loss of about $290,500 in general fund revenue this fiscal year and another $650,000 in the 2020-21 fiscal year. The drop in revenue is largely due to losses in sales and transient occupancy taxes, which are projected to take a combined $250,000 hit this year, Heath wrote. In the next fiscal year, sales tax losses are expected to balloon to $450,000.

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Grass Valley has laid off four positions: an assistant engineer, a general ledger accountant, a senior accountant and a senior administrative clerk. Seven positions were frozen: a maintenance worker, a city clerk, a mechanic, a police officer and three firefighters.

Kiser said he tried to steer a middle course between a low-impact storm and a major catastrophe.

Many jurisdictions say they don’t have the data yet, so they’re going to wait to see how the shutdown affects them economically, Kiser said. But waiting, he said, would likely affect more employees negatively in the long run.

“I lived (through) the 2008 downturn at the city,” he said. “We had to make adjustments monthly. We saw a lot more layoffs (being) needed than if we had acted quicker. If you don’t act in a timely fashion and six months go by, and you then find out you have a million-dollar deficit with six months less to make it up … you end up having to lay off twice or three times as many people.”

Looking to future

Kiser and Heath continue to plan ahead for the financial issues to come, even two years down the road.

One big question, both agree, is the California Public Employees’ Retirement System and its unfunded liability, and when it might begin to show the impact of the shutdown. That shortfall is supposed to be made up by increasing paycheck deductions and employer contributions. If the PERS system can’t make its quota, the unfunded liability will go up, Kiser said.

“From my philosophy, it is irresponsible not to be taking some steps now,” he said. “We are always looking at payroll,” he continued. “The majority of our union MOUs will be open soon. We potentially would be able to renegotiate, but they are going to want to be compensated fairly. It is something staff is looking at constantly.”

Right now, Kiser said, Grass Valley is fortunate in that it does have good reserves. But, he joked, predicting its economic future is like using a Magic 8-ball.

The question is, how does the pandemic shutdown affect consumers long term?

“The only thing I can guarantee is that people will change, and this will change how we do business,” Kiser said, adding it could take visitors months or even years to return in the numbers Grass Valley was accustomed to seeing.

Sales tax revenue is integral to the city’s finances, Kiser said, unlike the county’s budget, which is based more on property tax revenue.

All of Grass Valley’s current budgetary projections are open to change, Kiser and Heath said.

“When we take the budget for next year to the council, it will be a very baseline budget,” Heath said. “We are going to let them know this is a very fluid document. We will come back every couple of months and we will update based on what we find out. We are trying to be very practical, not overly conservative while at the same time not underestimate the impact COVID-19 will have on our revenue side. That’s why we’re making these decisions, to try and get in front of that. The last thing we want is to be caught, and try to deal with something in a knee-jerk reaction.”

Essential services

Both Heath and Kiser emphasized that Measure N and Measure E funding were vital in getting the city’s staffing levels up after the 2010 recession.

Measure E, passed in 2018, repealed a half-percent sales tax instituted by Measure N in 2012 and replaced it with an ongoing 1% sales tax to fund police officers and firefighters, police and fire equipment, street paving, sidewalk repair, park improvements and recreation services.

“If we didn’t have Measure E, we would be looking at a totally different workforce,” said Heath. “Revenues were significantly lower in 2010 and staff was significantly lower as well. Because of the approval of Measure N and Measure E, we’re in a situation where our budget is much higher, (it) brings us back to the staffing levels we experienced before the recession hit. Now, with COVID-19, we have a reset of everything. We don’t know where this is going to take us, and ultimately how it’s going to impact the budget that is coming up, because of the significant time lag in revenues.”

So what do the budget cuts all mean for the average city resident?

“Police and fire and public works are always going to be there,” Kiser said. “We feel the city is responsible for providing core services. The actions we took early on were to ensure we could maintain core services, not impacting fire and police, making sure people have water, potholes are still being filled, we still have parks moving forward.”

The work being done by positions that have been laid off will be spread out among remaining staff, Kiser said, adding, “We are getting lean.”

The three firefighter positions that were frozen were not current staff, but were funded last fall to institute a paramedic program.

Grass Valley-Nevada City Fire Chief Mark Buttron said that program was funded by Measure E, which he said would allow the department to staff engines with the “top echelon” of pre-hospital care.

“We were going to hire four firefighter-paramedics,” he said, adding that the department already had one and had an engineer going through paramedic school. “We would have had six, so we could either form a squad or run a paramedic on each fire engine.”

The positions had been funded, but not hired before the pandemic hit, Buttron explained.

“They just have been frozen for the time being,” he said. “Over the last 18 or so months, we had been trying to get that up and running. There were a lot of moving pieces, including compliance with regulatory agencies regarding equipment and personnel. … Our absolute hope and desire, after the pandemic, is that we can reengage and hire.”

Kiser said the city is doing its best in a fluid situation.

“Everyone right now is guessing,” he said. “We are using the best tools we have and the forecasting info provided to us. But there are so many unknowns out there. Does COVID-19 come back in the fall, or is it totally gone and we never see it again?”

Contact reporter Liz Kellar at 530-477-4236 or by email at lizk@theunion.com.