Borrowing money isn’t an ideal solution for Anaheim officials, but with city revenues drastically reduced by the pandemic’s halt to tourism, it’s the one they’ve chosen as an alternative to cutting city services to the bone.
The city will issue bonds for up to $210 million using facilities such as libraries, fire stations and City Hall as collateral, similar to a homeowner taking out an equity loan. The 30-year bonds could be repaid without penalty after 10 years, something officials said they hope to do if at all possible.
Tourism revenue plunged with the year-long shuttering of Disneyland, the Anaheim Convention Center, Angel Stadium and the Honda Center, and the limited capacity or closure of hotels, restaurants and shops that cater to visitors.
Anaheim was facing a deficit of more than $100 million this year and multi-million dollar gaps in each of the next several years. The recent announcement of $107.6 million in federal aid was good news, but only half of it is supposed to arrive this fiscal year, and officials have said they can’t predict how fast tourism will rev back up.
Before the City Council voted 6-0 (Jose Moreno was absent) on Tuesday, March 23, to borrow the money, Councilman Avelino Valencia asked what would it would take to address to red ink through budget cuts.
City Manager Jim Vanderpool was blunt: “It would require the layoff of dozens and dozens of police, dozens and dozens of fire personnel, closing most of our libraries, eliminating all public works street maintenance, senior centers, the list goes on and on,” he said. “It would destroy our public services.”
Consultant Mike Berwanger of PFM Financial Advisors said officials could wait until they’re ready to issue the debt in late May or early June to decide on the exact amount they’ll borrow, and they could go with a slightly smaller amount if the promised federal aid is in hand by then.
At an interest rate of 3.63%, Berwanger said the city will likely pay about $12.33 million in debt service annually.
Mayor Harry Sidhu said staff would be directed to spend as little as necessary to cover city expenses and come back to the council if circumstances improve and there’s extra money available. He also pointed to signs of better times ahead, including Disneyland calling back 10,000 furloughed cast members and the Angels’ home opener next week with as many as 10,000 fans expected.
Valencia, echoing several of his colleagues’ comments, said borrowing money for current expenses is not an easy decision, but “I do believe that our residents at the very least deserve the same level of services that they’re accustomed to and rightfully need.”
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