City Financial Picture Remains Steady
At this time, based on the information available, City officials anticipate the City is financially sound enough to weather the recession caused by the coronavirus COVID-19 pandemic. During the April 13, 2020 City Council meeting, the Mayor and Council members discussed using $8.8 million to address the unexpected COVID-19 expenses and projected revenue shortfalls anticipated through June 2021.
The funds come from a $9.3 million Structural Deficit Reserve created for future economic recessions or catastrophic events. In 2012, the City began preparing for future financial downturns by setting aside money to place in this reserve. This foresight is now being used for its intended purpose - to cover these unexpected pandemic related budget shortfalls. It is still too early to tell what the long term impacts will be until the City knows what the modified Stay at Home order will look like. The City will then determine if there should be adjustments to the financial plan.
Last week, Fitch Financial Rating Services, completed the City's annual credit review. Fitch upheld the City's excellent credit rating of “AA+”, citing the City's adequate reserve to support the operating budget for the remainder of Fiscal Year 2019/20 and next Fiscal Year 2020/21. Fitch cited “Vista’s substantial reserves and conservative budget management position is very well to withstand the current interruption in economic activity. Fitch believes the City of Vista has the capacity to absorb significant revenue losses because it has kept spending well below revenues in recent years."
Given the City's conservative past budget practices, strong pre-crisis margins, robust reserves and solid expenditure flexibility, Fitch expects the City to maintain general fund reserves well above the reserve safety margin requirement for the 'AAA' financial resilience assessment through Fitch's baseline economic downturn scenario.
Fitch Ratings Inc. is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975 Fitch Ratings' long-term credit ratings are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924.