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City Government, Businesses and Residents Cope with Dramatic Impacts
COVID-19 has thrown a huge curveball at every state and local government in the country, and Carson will be no different. The City has secured a testing site to provide free screenings with priority for Carson residents, but the City has been identified as one of the hardest hit communities in L.A. County.
City leaders have acted aggressively, and Mayor Al Robles has secured a partnership with a non-profit to make Carson the first city in the country to start testing all residents whether they are sick or asymptomatic at no charge.
Despite this, impacts will be far reaching once the crisis has passed. Carson is now faced with a public health crisis as well as an emerging budget crisis it must address in the next few weeks.
Carson was already facing a $5.4 million deficit before COVID-19 struck. Recent reports by City staff suggest the City will now lose between 6% and 12% in city revenues — as much as $9 million.
Carson City Manager Sharon Landers noted in a presentation on April 21 that this “will be one of the most difficult budgets Carson will work on.” One-third of City revenue comes from sales and oil taxes, both of which are severely impacted in our current economy. Virtually all other revenue streams are impacted as well, and Carson has run a budget deficit in 9 of the last 12 years.
As recently as last year, the City’s reserves had dropped to near exhaustion, and the City’s own budget documents state “the City’s revenue sources are not increasing as fast as expenditures.” Hiring freezes have conserved funds, but left many departments under-staffed and services have been reduced or eliminated.
There have been positive developments for the City. A significant legal victory favored the City and freed up more than $7 million. The City has also sold several properties to help with economic development and its own finances.
The California State Auditor ranked Carson 88 out of 471 California cities on “fiscal distress.” Carson is ranked similarly to Torrance, Gardena and many L.A. County communities. Neighboring Compton ranked No. 1, meaning it was in the worst position relative to risks such as debt, reserves and other factors.
Employee compensation, including retiree health insurance and unemployment claims, is the single largest expenditure of the City, accounting for more than half of the budget, or 56%. Carson does not have its own police force, but rather has a contract with the L.A. County Sheriff’s Department to provide public safety. This contract accounts for 22%of the City’s budget. The rest of the budget goes to items like animal control services also provided by the County, legal services, insurance, building security, software support, transit services and others.
As of last year, the City had a $98 million unfunded liability for the employee pension plan, managed by the California Public Employees Retirement System (CalPERS). The required contribution to the unfunded liability for FY19-20 was $7,043,000, some of which was discounted from pre-payments. These costs are estimated to nearly double in the coming years. A recent report to the City Council noted the cost for the “employee pension plan is expected to be $14.9 million in [Fiscal Year] 2024-25.” The City has been working on a bond to help defray some of these costs, but regardless this will be a continued strain on the City budget. Investment losses by CalPERS, likely to be large owing to COVID-19, will only compound this problem.
Learn more about how to stay involved in the budget process at CarsonCat.org/budget.