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The Sudden Consequences of COVID-19 Are Significantly Impacting Cities That Rely on Tourism & Entertainment for Revenue

Almost all cities are projected to lose some revenue. Those cities that rely heavily on sales and use taxes or business license taxes are being impacted to a lesser degree.
 Hotel Tax Revenue is Being Hit the Hardest by the Pandemic 
Estimated statewide loss by tax source through fiscal year 2020-21. Hotel taxes are projected to decrease 66 percent, sales and use taxes are projected to decrease 12 percent, and business license taxes are projected to decrease by 7 percent.
Hotel Tax Is the Largest Source of Tax Revenue for Some Cities

See examples below

Certain California cities rely more heavily on hotel taxes as a percentage of their total tax revenue. For example, 56 percent of Calistoga’s total tax revenue is from hotel taxes. For South Lake Tahoe hotel taxes is 48 percent, for Monterey it is 37 percent, for Mammoth Lakes it is 71 percent, for Avalon on Catalina Island it is 43 percent, and for Anaheim it is 47 percent of total tax revenue.
COVID-19 restrictions also resulted in revenue declines for cities that collect taxes on admissions to large events and parking at airports or entertainment venues . . .
illustration of tennis player
Indian Wells is Most Impacted.
This city could lose 50% of its general fund revenues, when compared to annual expenditures, by the end of fiscal years 2020-21 if the BNP Paribas Open tennis tournament is canceled for a second year in March 2021.
In Order to Buffer the Impact of Revenue Reductions, Cities May Need to Use Their Reserves
Economic forecasts indicate that because of COVID-19, 32 cities will lose general fund revenues that exceed 20% of their annual expenditures by the end of fiscal year 2020–21.
 11 Cities May Need to Cut Services  and Expenditures or Raise Revenue to Close Budget Gaps
Anaheim is at risk of exhausting its reserves.
At risk of falling below the recommended reserve level:
Avalon
Burlingame
Calistoga
Dana Point
Healdsburg
Mammoth Lakes
Monterey
Napa
Ojai
South Lake Tahoe
21 Cities Likely Have Sufficient Budget Reserves to Help Them Absorb Revenue Reductions
  • Beverly Hills
  • Buellton
  • Carmel-By-The-Sea
  • Coronado
  • El Segundo
  • Emeryville
  • Garden Grove
  • Goleta
  • Half Moon Bay
  • Indian Wells
  • Loyalton
  • Marina
  • Millbrae
  • Pacific Grove
  • Pismo Beach
  • Sand City
  • Solvang
  • Sonoma
  • West Hollywood
  • Westlake Village
  • Yountville
COVID-19 had minimal to no impact on property tax revenues, which are projected to increase statewide. Property tax increases may offset some COVID-19 revenue reductions.

We primarily based our analysis on financial data from cities and economic forecasts developed by a consultant.