Page 15 - FY 2020-21 Revenue Outlook

The Economy and Revenue Assumptions
Fiscal Year 2020-21

The ongoing COVID-19 pandemic and the social distancing measures
implemented across the United States to contain its spread have had an
immediate impact on City operations, drastically increasing City expenditures and
reducing receipts at the same time. With the cessation of non-essential
operations beginning in mid-March, the impact to current year receipts cannot be
accurately quantified at this time. While economists largely agree this quarter will
mark the start of a recession, there is no consensus on its severity or length.
Citing the relative health of the pre-pandemic economy, higher state and local
government reserves and current stimulus efforts, less conservative forecasts
have predicted a U-shape recession and recovery in 2021. At the same time,
others offer bleak predictions for a sharp and extended economic downturn that
could equal the impact of the Great Depression. The comparison to an event that
occurred more than ninety years ago indicates that data from recent recessions
may not be used to reliably predict the impact to future year receipts

What we do know is unemployment has skyrocketed, with 20 million Americans
filing for unemployment during the first month of the various social distancing
orders implemented by states, counties, and local governments nationwide; Wall
Street indices have had their worst losses since 2008—the start of the Great
Recession; and businesses have experienced disruptions and closures. In the
foreground, state and local governments and the medical community have
struggled to protect the health and safety of the public with burdened resources.
The Federal Government has responded with interest rate cuts, small business
loans, stimulus checks, and emergency relief funding in its efforts to sustain the
economy and support the pandemic response efforts.

2019-20 Revised General Fund Revenue

Total adopted General Fund revenue for 2019-20 was $6.57 billion, an estimated
increase of 5.3 percent above 2018-19 actual receipts. The estimate for 2019-20
total General Fund revenue has been reduced by $108.5 million (-1.7%) to
$6.46 billion, reflecting the impact of the predicted recession on current-year
economy-sensitive receipts, the impact of the ongoing COVID-19 pandemic and
the City’s Safer at Home order on revenue-generating services, and other
deviations from the adopted budget.

The reduction in estimated revenues for 2019-20 is driven by pandemic-related
losses anticipated for the economy-sensitive revenues in the transient
occupancy, parking occupancy, business, sales and property taxes (-$53.6
million, -$19.9 million, -$29.3 million, -$3.3 million, and -$2.0 million, respectively)
attributed to the decline in tourism, business closures and job loss, as well as tax
relief efforts being extended in recognition of these hardships. Other pandemic-

5