San Francisco’s $1 Billion Loss Forecast Shows Toll to Cities

(Bloomberg) --

San Francisco is forecasting that it may lose as much as $1.26 billion of tax revenue over the next two years because of the severe economic shutdown imposed to slow the spread of the coronavirus pandemic.

With restaurants and stores shuttered and hotels vacant, the lost revenue is already leaving the city facing a deficit of as much as $287 million for the fiscal year that ends in June, according to a report released Tuesday by Controller Ben Rosenfield and city budget analysts. The revenue hit could cost San Francisco another $972 million through June 2022 if the nation’s economy doesn’t quickly rebound from the recession.

“Financial losses associated with the emergency have been stark and immediate, and the level of uncertainty of both city revenues and expenditures is historically high,” the city officials wrote.

The forecast is one of the most detailed estimates from a major city of the financial toll of the epidemic, providing an early look at the types of losses likely to be felt nationally as local economies grind to a virtual halt.

San Francisco, at the epicenter of the nation’s technology industry, and the surrounding communities have ordered residents to stay home until May 1, an order first put in place on March 16. While President Donald Trump has signed a more than $2 trillion economic stimulus measure, there’s already concern that it doesn’t provide enough to head off all the economic damage, with House Speaker Nancy Pelosi on Monday saying that she wants to see “more money for state and local government.”

San Francisco’s analysis didn’t include the government’s cost to respond to the outbreak, the federal stimulus bill or the financial losses the city’s retirement system suffered from the stock market’s drop. It evaluated the impact of a limited recession in which the economy recovers by the end of calendar year 2020 and a severe one in which the recovery takes another year.

The city, with an annual budget of about $6 billion, may lose as much as $500 million more this fiscal year from revenue declines at the airport, transportation system and port, whose operations are separate from the general fund, the report showed. While the city’s reserves are better than they were in the prior two recessions, they’re “insufficient” to offset cuts for multiple years, according to the controller’s presentation.

Among the city’s various taxes, hotel levies are projected to see the steepest decline this year with a $124 million hit under the worst-case scenario. The effect on hotels “has been faster and more extreme” than any other crisis, including 9/11.

”The economic impact that is already hurting our residents and businesses is also going to require difficult decisions by the city moving forward,” said Mayor London Breed in a statement.

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