In ‘worst case scenario’ Glenwood must bridge $6 million general fund gap in 2020
Should the worst-case scenario play out, the city of Glenwood Springs’ general fund will endure a $6 million hit in 2020 as a result of the COVID-19 crisis.
Chief Operating Officer Steve Boyd said the city generally collects approximately $20 million worth of sales and use tax revenues, annually, with close to $7.7 million going toward the general fund.
The worst-case scenario assumes that the city would lose out on 50% of its sales tax revenue for the remainder of the year.
“We have this tough phenomenon here. We’re sales tax-based but we’re a tourism community,” Boyd said at a May 7 city council meeting. “Tourism is one of the industries that is going to get hit hardest here and we’re already seeing that happen.”
Backed by a healthy economy, the city’s sales tax revenue stream had been right on pace with projections through February.
Although the city was still in the process of collecting sales tax receipts for March, Boyd projected an 18% decrease for the month and a 7% decrease for 2020’s first quarter.
“We won’t see April numbers until a little bit later in the month but we’re going to get crushed,” Boyd said. “April is going to be a very, very difficult sales tax collection period.”
Boyd forecasted April’s sales tax revenue being down between 45% and 55%.
Bridging The Gap
When the city puts together its general fund budget every year, it assumes that all of its vacant positions will eventually be filled, Boyd said.
“We budget for a general fund to be fully staffed and it never works out that way,” Boyd said. “We’re in a hiring freeze now so I don’t expect that, other than a police officer or two, we’re going to hire anybody between now and the end of the year.”
Should that be the case, the city would save approximately $650,000 Boyd explained.
Additionally, because the city had to submit its 2020 budget prior to the November election, it was unable to factor in the funds raised from Glenwood’s recently imposed tobacco tax.
Glenwood voters approved the city’s tobacco tax last November, which in 2020 should bring in $650,000.
According to Boyd, excluding public safety, the city’s various departments were also able to slash just over $600,000 worth of expenditures for the remainder of the year.
“There are no operating budget cuts to the fire department or to the police department,” Boyd said.
In mid-April, the city laid off all of its part-time employees who were paid out of the general fund. The tough decision to do so, will likely save approximately $540,000.
“As soon as we can get back up and running, we’ll bring them back to work,” Boyd said.
Additionally, the combination of furlough days for some full-time employees, and a 10% reduction in salary for others, as well as halting all 401(k) contributions will save the general fund nearly $900,000.
The city will also temporarily divert nearly $700,000 from purchasing new vehicles and other capital expenses toward offsetting a roughly $6 million general fund deficit.
Lastly, under the worst-case scenario, the city will also pull $2 million from its reserves.
“All of these things taken together add up to about $6 million,” Boyd said. “I don’t think it’s going to be that bad between here and the end of the year. I certainly hope that it is not.”
Boyd is expected to brief council on the city’s other funds such as its enterprise and capital funds on May 21.
The city has 20 different funds, and its annual budget can vary between $65 and $90 million dollars.
The city’s overall budget fluctuation primarily depends on what capital projects are planned that year.
The general fund is the city’s largest fund and typically has a budget of around $21 million.
“We wanted to give employees a sense of stability,” said Glenwood Springs City Manager Debra Figueroa. “This plan gives us at least certainty for a little while that we know what we’re doing and where we’re going.”
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