As the fiscal year nears an end and Mayor London Breed prepares to introduce her two-year city budget proposal, The City has more revenue on hand than projected — about $157 million more.
The City Controller released a budget update Thursday showing a budget surplus of $157.3 million in the fiscal year that ends June 30, largely from better than anticipated revenue from property taxes and a tax on the sale of commercial properties.
This is a new budget surplus; the $125 million surplus identified in February has already been allocated by Breed and the Board of Supervisors for things such as business relief to offset some of their financial impacts from the COVID-19 pandemic.
“It is definitely positive to have another large surplus announced in the current year,” said Supervisor Matt Haney, chair of the Board of Supervisors Budget and Finance Committee.
He noted that the “the new revenue mostly reflects unexpected one time increases” and that overall trends are mostly unchanged.
“Most of these surplus funds will be used in the next fiscal year to invest in our city’s recovery and ensure fiscal health,” Haney said. “There are some areas where I think we should prioritize spending now and not wait, particularly in tenant rent relief and protecting public safety.”
The revenue boost is partly attributable to the passage of Proposition I last November, which increased the tax on the sale of properties valued at more than $10 million.
Supervisor Dean Preston, who introduced Prop. I for the ballot, has called on Breed to use the surplus funds from the tax to fund tenant relief and affordable housing programs. Anticipating the surplus, he introduced on Tuesday a spending proposal to allocate $27.5 million for those purposes.
“We were told Prop I would kill real estate transactions and grind the economy to a halt, instead we have raised nearly $60 million since January,” Preston said Thursday. “With an eviction cliff around the corner, our mayor must direct these funds as the voters intended: to COVID rent relief and permanently affordable, social housing.”
Breed’s spokesperson Andy Lynch said that “right now we’re in the process of developing the Mayor’s two-year budget proposal, which will include this new revenue.”
“She will present that proposal to the Board of Supervisors in just a few weeks and they will then have the opportunity to provide their input and return the budget to the Mayor for her signature,” Lynch said. “It doesn’t make sense for the Board to introduce additional spending measures outside of the budget process—that is what the budget is for. The Mayor will not support any supplemental spending proposals.”
The Controller’s budget report is an update from the one released in February and since then it shows “additional weakness in hotel, sales, and business taxes.”
The COVID-19 pandemic “continues to significantly affect the business tax revenue base” and “sales tax from the restaurant and hospitality industry, as well as fuel and services stations are weak, even with the re-opening of the economy,” according to the report.