Pandemic-induced impacts to the city’s budget don’t appear to be as severe as expected — at least for now.
City officials recently announced that a projected $1 million fiscal year 2019-20 deficit didn’t materialize, and a cumulative $1.4 million surplus is forecasted for fiscal years 2020-21 and 2021-22.
“It was better news than what we originally anticipated,” said Mayor Bob Taylor.
Projected COVID-19 hits to the city’s fiscal year 2020-21 and 2021-22 property and sales tax revenue — two of the city’s largest general fund income sources — aren’t expected to live up to projections, according to Christine Andrews, assistant director of finance and information systems.
The recently announced 2020-21 assessed valuation — the dollar value assigned to a property to measure applicable taxes — came in 2% higher than projections, Andrews said.
Andrews said that 2021-22 city projections of a 5% property value dip don’t appear to match up with city consultant projections of a 2.5% jump in valuation. She reported the county will announce official 2021-22 figures in January.
“Despite the potential for future rental evictions or foreclosures, this appears exceedingly unlikely to occur in a significant manner before values are set in January,” Andrews said. “This projected increase in assessed valuation is responsible for the vast majority of the budget improvements.”
On the sales tax front, fiscal year 2020-21 sales tax figures, originally estimated to dip 7%, are now expected to decrease by only 3.5% and then rise 2% in fiscal year 2021-22.
Other taxes, such as those from business licenses, gas and hotels, also haven’t decreased as much as anticipated.
The city has seen significant expenditure savings, due in part to reduced parks and recreation activities, in addition to reducing other spending to essential supplies and services, Andrews said.
“Although the long-term impacts on the economy are far from clear, several revenue assumptions in the budget are more conservative than the recent data supports,” Andrews said.
Going forward, city officials noted that they intend to budget conservatively to account for more unpredictable pandemic-induced financial challenges.
A number of previously delayed projects shelved earlier this year in anticipation of COVID-19 budget jolts will continue to be delayed for the time being, including increasing the city’s police department by five positions and adding restrooms and pickleball courts to select city parks.
Beyond fiscal year 2021-22, the city is projecting it will need to dip into its budget stabilization fund – comprised of past general-fund savings – for $1 million a year for eight years to cover expected general fund deficits.
An additional $600,000 per year for those eight years will be leveraged to continually increase the general fund’s 30% reserve as expenses increase, city officials said. The current $17.2 million budget stabilization fund will still have an estimated $4.8 million at the end of the eight-year period, according to city documents.
“There is a lack of long-term visibility to the ultimate economic impacts of the pandemic,” Andrews said. “Staff will continue to monitor the budget, collect the most current data available and report regularly to the city council, as long as the economic effects of the pandemic persist.”
City Councilmember Claudette Staton applauded the city’s pandemic-affected budget management.
“I thank the staff for paying attention to what is really going on in the market and being frugal with the people’s money,” she said.
Updated budget projections are expected to be brought back in January as part of the city’s mid-year budget process. City staff will propose any necessary adjustments to the 2020-21 operating budget at that time.
To view the complete report on the state of the city’s budget, visit packet page 35 at https://bit.ly/2TeskRd.