PORTLAND — City officials are warning of an unprecedented and dire financial situation.
The coronavirus pandemic has stressed the municipal budget, siphoning from its reserves, and it’s unclear how the city’s revenue streams will rebound. Any rebound scenario threatens to have an impact on taxpayers and the next budget year’s municipal spending.
“It’s been much worse than we had imagined and things will last a little longer than we had hoped,” Finance Director Brendan O’Connell told the finance committee May 14.
Since the pandemic shutdowns started in mid-March, the city has lost an estimated $2 million in excise taxes and another $2 million in parking revenue and park, recreation and facility fees. Public works and waterfront revenues are down $500,000.
Through April, the city received just $175.4 million, or 94%, of the $185.9 million in property tax revenue. Property taxes had been due by March 20, but because of the coronavirus, the deadline has been pushed back to June 1.
In April alone, O’Connell said, there was a $6 million revenue shortfall. He expects a similar loss in May.
Cash flow at this time is not a problem, he said.
“Although the month of April was brutal in terms of revenue collection versus expenditures, the city has no imminent cash flow concerns” because it has sufficient reserves, O’Connell told the Forecaster.
“Our primary concern right now has been reduction of our ongoing operating expenditures so we can better match with our current revenue collections,” he said.
If revenue deficits continue, the city will have to continue some of the cost-saving measures, which have included furloughs, project deferrals and spending/hiring freezes.
Several sources of federal funding have helped, including a $1.1 million coronavirus response Housing and Development Block Grant that the City Council officially accepted Monday.
Still, O’Connell said, the fiscal year 2021 budget, which is being reworked and could be ready for adoption by the council in mid-September, will take a hit.
“The current level of city expenditures is going to be unsustainable in fiscal year 2021, and significant cuts and reductions in service are going to be required in FY21,” he said.
The worst-case scenario, O’Connell said, is if the revenue streams continue to be as bad as they were in April and the city continues to lose $6 million in revenue a month throughout fiscal year 2021. The resulting $72 million revenue shortfall would have to be paid by taxpayers, through a 60% cut in departmental spending or by laying off 700 city employees.
If the city sees a $3 million monthly revenue shortfall next fiscal year and misses out on $36 million in revenue, it could ask for taxpayers to make up that difference, reduce departmental spending by 30% or lay off 350 workers.
A more realistic scenario, O’Connell said, would be that revenue streams rebound enough so that the city has a $1.5 million per month, or $18 million, shortfall in revenues. Then, the city could opt to increase reliance on taxpayers, decrease expenditures by close to 16 percent or lay off 200 workers.
The city, he said, has 1,395 employees, plus temporary and seasonal workers.
City Manager Jon Jennings said he has “great concern about a sizeable reduction in staffing” and has asked O’Connell to look into at the impact of reducing employee hours in an effort to maintain jobs.
“I cannot stress enough the critical situation we are in,” Jennings said. “We do know property taxpayers of this city cannot sustain a large increase, or frankly an increase at all. You will see a negative budget in FY21. That is our reality. That will have an impact on the level of city services.”
Finance Committee Chairman Nick Mavodones is also fearful of large cuts to city staffing levels.
“Once programs and positions are gone, it takes years and years to get them back,” he said.
While city leaders begin to refine the 2021 city budget, school leaders are putting the final touches on the district’s budget proposal for the 2020-2021 school year.
On Tuesday, the school’s finance committee approved a $119.8 million budget, which would represent a zero percent tax rate increase. The budget is approximately $2.5 million less than the one Superintendent Xavier Botana originally proposed March 10. The school department has been encouraged by the City Council’s finance committee to explore a budget that would not increase the tax rate.
“My sense is I don’t think we can have a tax increase this year,” Mavodones told the board at the May 14 joint finance committee meeting.
The budget was set for a public hearing and first reading by the Portland Board of Education on Tuesday. The school board will take final action on the budget March 26, before passing it on to the City Council for its review. The council is expected to conduct a final vote on the budget June 15.
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