Columbus officials planning on budget shortfalls due to COVID-19. Here’s a breakdown

Columbus leaders are currently facing a new hurdle as a result of the coronavirus pandemic: dealing with the financial ramifications of weeks of shuttered businesses and shelter-in-place orders.

Columbus Consolidated Government is currently working to adopt a budget for fiscal year 2021, which starts July 1, amid the financial uncertainty caused by the virus.

Parts of the budget the city knows will be hit hard include sales tax and hotel-motel tax. But as the crisis is ongoing, there is a lot left to be determined.

Mayor Skip Henderson presented Columbus Council members with his recommended fiscal year 2021 budget April 28.

In his presentation, made sitting in front of a computer from a room inside his home, Henderson explained the difficulty of having to predict what revenue the city will or won’t collect when the global economy has been so suddenly shaken by the virus.

“The hard part for us is we really don’t have anything to compare this to,” he said at the time. “The recession of 2008...it was as deep and as long as any recession we’ve had in history, but even that is a completely different animal. That was led by real estate: this is something that is caused entirely by a germ. We don’t really know what we can expect.”

Despite the multitude of challenges, Henderson was able to present a balanced budget with a 1.52% decrease from this year’s budget.

Some budget items Henderson wishes to maintain include:

• Funds allocated to purchase necessary safety items like additional turnout gear and reductors to decontaminate them for fire and emergency personnel. “These were some items that were desperately needed to make sure the folks that are taking care of our citizens are taken care of,” the mayor said.
• No increase of insurance premiums for city employees. “It was important to us not to add any extra burden to our employees,” Henderson said.
• Continued emphasis on removal of blight from the city with an allocation of $250,000 to the Building Inspections and Code Enforcement department’s demolition budget. This is less than last year’s $1 million allocation but still a 500% increase over a typical year’s demolition budget.
• A 2% cost of living adjustment for city employees effective January 2021.

The city is worried not only by the effects of the virus locally but on a statewide level as well.

During a budget review session May 5, City Manager Isaiah Hugley cited an Atlanta Journal-Constitution article, which reported May 1 that Governor Brian Kemp directed state agencies to plan on cutting “more than $3.5 billion” from their fiscal year 2021 budgets.

Kemp’s budget office and General Assembly budget committees sent a memo to state agencies asking them to develop new spending plans for the year, employing a 14% cut from their 2020 budgets, the AJC reported.

“That’s bad news because it’s going to trickle down to us,” Hugley said. “We must prepare for difficult days ahead of us and we’ve tried to hope for the best and prepare for the worst and this has been communicated to our department heads and elected officials.”

Council has additional budget meetings scheduled for 9 a.m. May 19 and 2 p.m. May 26.

The meetings can be viewed live and in recordings on the CCG TV YouTube channel.

For now, here’s what’s known about the 2021 budget:

Sales tax revenue to take a hit

The March 2020 sales tax revenue was down 4% from March 2019, but the city’s sales tax revenue is still up 4% year to date for fiscal year 2020 compared to fiscal year 2019, according to Angelica Alexander, the city’s finance director.

The city won’t know the full effect of one complete month of the economic shutdown until the end of May, when the April sales tax numbers will be released by the Georgia Department of Revenue, she said.

Keeping in mind what they don’t know, the city projects an 8% reduction in sales tax revenue from fiscal year 2020, in which the city projected $37.6 million in revenue. The city projects $34.8 million in sales tax revenue in fiscal year 2021.

The projected revenue for the city’s 1% Local Option Sales Tax (LOST) is $34.8 million, and its 1% Other Local Option Sales Tax (OLOST) is expected to also bring in $34.8 million.

The LOST was enacted in 1976 to keep the ad valorem tax as low as possible. It is put in the general fund to be used for day to day operations.

OLOST revenue funds expenses for public safety (70%) and infrastructure (30%).

“A significant drop in sales tax revenue would make it difficult to provide funding for critical infrastructure improvements to include road, stormwater, facility and technology enhancements,” Alexander said.

Henderson said if he had to guess, he doesn’t expect a detrimental drop in that revenue.

“If you look at what’s been going on in Columbus, even though people have been sheltering in place and for the most part social distancing, grocery stores have been having a tough time keeping their shelves stocked,” Henderson said. “We’ve still got people supporting local restaurants by picking up orders.”

Understanding the current hardship the pandemic has placed on citizens, Columbus Council voted May 12 to delay asking voters for an additional 1% sales tax for capital improvements until November 2021. The vote was initially scheduled for this year.

Trade Center, other venues could see big budget cuts

The impact on sales tax might not be as damaging as the impact on city entities that rely on hotel-motel tax.

Due to a marked decline in tourism and closure of some of Columbus’ biggest hotels, the city is anticipating up to a 50% decline in transient occupancy revenue, also known as hotel-motel tax. They’re estimating the pandemic will bring revenue down from a projected $5.3 million in 2020 to $3.6 million in 2021.

That revenue currently supports the operating budgets of the River Center (which receives 1%), the Convention and Visitors Bureau (which receives 4%), the Civic Center (which receives 2%) and the Convention and Trade Center (which receives 1%).

For example, the budget for the Trade Center is just over $3 million. Operations are funded by event proceeds, beer tax (budgeted at $646,000 for 2021) and hotel-motel tax (budgeted at $450,000 for 2021).

The Trade Center budget for hotel-motel tax in 2020 was $650,000.

District 9 at-large Councilor Judy Thomas said during the May 5 budget meeting that she anticipates the impact will be much greater than a $200,000 loss.

“I’m really concerned about the operations of that facility,” Thomas said. “We’ve had five hotels in Columbus close; I think we’re gong to see a dramatic shift in how much hotel-motel tax we’re going to get.”

Reserve funds could shrink if pandemic continues

One concern when crafting the budget is how much fund balance reserves will have to be used to finish out 2020 and balance the proposed budget.

Reserves are part of the general fund and are not allocated to any one purpose; they are available in order to protect the city against revenue losses and emergency expenditures, which may be necessitated by the impacts of the coronavirus.

The city has been working to build its reserves back up over several years of falling below recommended levels.

The proposed 2021 fund balance rests at $37 million, enough money to fund all government operations for 72.52 days. The city projects to end fiscal year 2020 at 75.93 days of fund balance reserves, though that could change if the city sees a sharp decline in revenue.

The goal of the city is to keep the reserve at 90 days, but no less than 60 days.

“We set a lofty goal of the days because when things go pretty south you’ve got to be able to continue to provide the services to the citizens,” Henderson said.

The proposed 2021 budget uses $1.5 million in fund balance in order to be balanced. In the recommended budget book, Henderson states that the funds will be used to fund “prior ongoing commitments related to personnel expenses, debt service, public safety system enhancements and maintenance, cost allocations and additional capital appropriations needed to complete the technology enhancements associated with the new court management system.”

The finance director said the city’s goal is to balance the budget without the use of fund balance reserves, which wasn’t possible this year.

“Using $1.5 million in fund balance reserves is higher than what has been used in recent years,” Alexander said.

Council already planning for revisions to budget

Council has already discussed a mid-year budget review, in which they will have a better understanding of how the pandemic has impacted revenue.

In order to keep costs down until then, Henderson’s proposed budget includes some capital purchases, though those expenses will be delayed until later.

“That way we have six months to be able to take a look and see how our revenues are trending, and if they are healthy and they’ve regained that momentum, we’ll go ahead and secure all of those capital items that we originally budgeted for,” he said. “If not, we’ll have to prioritize as to which ones we’re going to get now and which ones we’ll try to get in 2022.”

The city is counting on some increases in other types of revenue to help bridge the gap.

The tax assessor’s office expects a 1% increase in the real property tax digest in 2021, or an increase of $1,163,000.

Other positive news is that the city had budgeted $4 million in tag ad valorem tax revenue, has currently collected $6.34 million after 7 months, and projects they will end the fiscal year at $7 million.

Other increases include: an anticipated increase in insurance premium taxes of $900,000; an increase in franchise fees of $525,000; an increase in inter-fund transfers of $400,000; miscellaneous state revenues of $390,000; and an inmate subsidy of $150,000.

The city also anticipates $390,000 in revenue as result of renting out portions of the new health department building space.

In all, Henderson is confident the city will be able to navigate the uncharted territory of the 2021 fiscal year.

“We’ve budgeted very, very conservative,” he said.