Palm Springs faces millions in deficits, but hopes for boost from tourist spending

Hopes and prayers, not fiscal responsibility.  That is how Palm Springs is run—run into the ground.  Now they have to hope tourists will bail out a mismanaged city—and incompetent city council and staff.

• “Palm Springs is facing a multi-million-dollar deficit due to declining tax revenue and increased expenses.
• The city may need to make spending cuts, but some officials are hopeful that a strong tourist season could improve the financial outlook.
• Despite the challenges, city officials highlight the growth in the local economy compared to pre-pandemic years.

The city of Palm Springs is facing a deficit of several million dollars as revenue from taxes declined and government expenses increased in late 2024.”

This is just another California city, run into the ground by politicians using tax dollars to buy votes and love.  They will find out the State is totally broke and the Feds are cutting back on waste, fraud and abuse.  Unless the city makes major cuts, no one will bail them out.

Palm Springs faces millions in deficits, but hopes for boost from tourist spending

Sam Morgen, Palm Springs Desert Sun, 3/5/25    https://www.desertsun.com/story/news/local/palm-springs/2025/03/05/why-palm-springs-faces-millions-in-deficits-likely-spending-cuts/81424262007/

AI-assisted summary

• Palm Springs is facing a multi-million-dollar deficit due to declining tax revenue and increased expenses.
• The city may need to make spending cuts, but some officials are hopeful that a strong tourist season could improve the financial outlook.
• Despite the challenges, city officials highlight the growth in the local economy compared to pre-pandemic years.

The city of Palm Springs is facing a deficit of several million dollars as revenue from taxes declined and government expenses increased in late 2024.

The city could be forced to enact spending cuts during the next two-year budget cycle to account for the decline, but some on the city council are maintaining hope that a recent surge in the local economy could improve the financial outlook.

“As a retailer, I think January and February are quite strong this year. So that, at least, looks good so far,” City Councilmember Jeffrey Bernstein, who is also the owner of the downtown shop Destination PSP, said during a council meeting last week. “I think we should have cautious optimism going forward.”

The council received the tepid economic data during the mid-year budget update, which takes place halfway through the fiscal year, which begins on July 1 and ends June 30.

During the first half of fiscal year 2025, which ended in December, the city earned about $3 million less from its transient occupancy tax than it did over the same period in fiscal year 2024, a 6% decrease. Sales tax also declined by around 5%, dropping from $8.9 million to $8.5 million.

But the city’s financial data for the current fiscal year does not account for the beginning of the 2025 calendar year, a period when a large chunk of tourist spending typically happens.

The city’s finance director, Kristopher Mooney, said December showed promising results that could indicate a strong tourist season for the city in the upcoming months.

“Everybody knows how seasonal our revenue is here. We get a lot of TOT revenue in the spring from our tourism industry, so it’s hard to predict,” he said. “If we have a really good season, that number could be greater than what we’re showing.”

Still, Palm Springs likely faces financial challenges as it begins to form a new budget for the next two fiscal years. The city ran a deficit of around $5.7 million in FY 24, and projects a $6.8 million deficit in FY 2025. Around $3.2 million of the current fiscal year’s deficit comes from ongoing operating expenses, with the rest from one-time expenses that won’t occur in future years.

The city plans to make up the deficit by dipping into its rainy day fund, formally called the “unassigned fund balance,” which is expected to drop from roughly $62.9 million last fiscal year to $49.9 million at the end of this fiscal year.

The unassigned fund balance is meant to be used during emergencies to keep city services functioning, and it is considered poor financial policy to continuously draw from it.

“We don’t know what the next two to four years are going to look like,” City Councilmember Naomi Soto said during the meeting. “So making sure we don’t get too low on that is something we should think about.”

Reducing costs could be difficult for the city as expenses have risen and are expected to continue to rise in the future.

Since Fiscal Year 2023, salaries and benefits have increased from $81 million to an expected $95 million. The figure is expected to increase another $5 million over the next fiscal year.

“We’re keeping an eye on that number,” Mooney said.

He noted elsewhere in the meeting that cost reductions would be likely.

The city expects revenue to remain flat in the immediate future, stabilizing after a multi-year drop. Palm Springs’ economy is still returning to normality following a surge in business at the beginning of this decade. The city’s revenues increased when people found refuge in Palm Springs during the COVID-19 pandemic.

City officials have spoken of the pandemic years as an anomaly and point to growth in the local economy compared to years like 2018.

But the economic downturn has been hard on local businesses, which reported precipitous declines last summer as tourists largely stayed away during the hot months compared to previous years.

During the meeting, Bernstein pointed to several revenue generators that could make a big impact on local businesses, potentially turning around the slump.

“We’re going to have the Thompson, we’re going to have the Plaza Theatre opening in December,” he said. “We have other new restaurants and retail that continue to be fairly strong in Palm Springs.”