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For Lemon Grove, a small city with a big budget problem, the COVID-19 pandemic couldn’t have come at a worse time.
Officials told the City Council last week that the projected year-end deficit increased by nearly $500,000 after accounting for the impacts of coronavirus. By the end of the current fiscal year, which is less than two months away, the East County suburb is expected to be about $770,000 in the hole. That figure is expected to increase to $1.8 million at the end of the following fiscal year.
These projections are especially jarring when one considers that voters rejected a three-quarter cent sales tax in March. Without the additional tax revenue, some proponents of Measure S said they feared that the city would have to disincorporate, meaning Lemon Grove transfers authority over its affairs to the County Board of Supervisors.
Proponents also pointed out that if the new sales tax didn’t pass, the city’s reserves were projected to dip below 25 percent within five years. Now, those reserves are projected to run completely dry in just two years if the city stays on its current path.
Sales tax losses are largely responsible for the weakened revenue projections as residents are being asked to stay home and many local businesses have shuttered or reduced their operations.
The city is considering another ballot measure in November to supplement revenue amid the pandemic. It could raise business license fees and taxes on marijuana. Putting the measure on the ballot would cost about $20,000, officials said.
City Manager Lydia Romero told the City Council that Lemon Grove may be in line for federal funding, and possibly state funds as well.
Lemon Grove is looking at ways to reduce its expenses both big and small — everything from cutting city employees’ salaries and switching insurance providers to using less paper. The city has already enacted a hiring freeze and is planning to leave any additional open positions unfilled indefinitely.
“Every city in California is looking at these kinds of service cuts,” Romero said.
In response to a records request in late March, City Clerk Shelley Chapel said Lemon Grove — like other governments around the region — had suspended operations, except for critical public services. The list of potential budget cuts offered by officials last week also included a $43,770 reduction in total City Council member pay and a 10 percent salary cut for the city manager.
Because of its size, Lemon Grove does not qualify for funding under the federal CARES Act, but it’s in line to receive $60,340 in Community Development Block Grant that will be doled out through San Diego County, which is responsible for passing along those monies to a handful of cities, including Lemon Grove. It’s not immediately clear how the grant — intended to support development of better housing and the expansion of economic opportunity for low- to moderate-income residents — will be spent.
The amount of the money is not insignificant, but it’s also not enough to prevent the city’s budget from falling off a cliff, which has been in the making since long before the pandemic.
Beyond a drop in sales tax revenue, officials have said the coronavirus has ground facility rentals and passport processing to a halt, and there are fewer companies seeking building permits. Interest earnings and hotel tax revenue has also dropped.
Even as the city struggles to make ends meet, officials claim spending is not the issue. Multiple graphics that were provided as part of the presentation last week show Lemon Grove spending well below its comparable neighbors in many areas, including public safety, community development and public works.
“The city of Lemon Grove is already providing services at the most cost effective out of any of our neighbors,” Administrative Services Director Molly Brennan said.
She noted that in fiscal year 2019-2020, Lemon Grove spent $547 per capita in general fund expenditures, making it the lowest among the cities shown. Neighboring El Cajon spent $740 per capita that year and Solana Beach spent $1,435.