Bloomington Estimates $5-10 Million Financial Hit From Pandemic
“The city is in a good position, but it’s not in a great position,” City Manager Tim Gleason said Monday night in terms of the city withstanding the economic impact of COVID-19.
Finance Director Scott Rathbun said the city has about $22 million in unobligated cash reserves. Staff said a general recommendation is to keep two months of spending as reserves. That is about $17-18 million. The actual flex, Rathbun said, is about $4 million.
“We fully expect we will have to realize some of those cash reserves to plug the gaps,” said Gleason.
"This is exactly why we spent time and effort building up that emergency fund balance."
Among the assumptions that went into staff estimates are a 75% reduction in motor fuel tax money during the shutdown, a 90% hit to hotel-motel tax revenue, 100% loss of revenue from the Bloomington Center for the Performing Arts and Grossinger Motors Arena, and some parks programs while operations are suspended. Home rule sales tax receipts also will fall.
Overall revenue fell 3-5% during the Great Recession of 2008. Rathbun said that is a guide for city planners, as is a white paper projecting a severe impact of 7%. Rathbun added some cushion for a final estimate of an 8.5% recessionary impact on the city for the rest of the fiscal year.
Rathbun also noted there will be a cash flow issue and some significant reduction in revenue from income tax distributions from the state. On the other hand, he noted water use is up and user fee supported programs such as sewer service will not be materially affected.
Rathbun, speaking at a Committee of the Whole meeting, said working assumptions include a material effect on revenues from the shelter-in-place order that increases the longer it goes on:
- If shelter-in-place is lifted May 1, a $5 million impact
- If lifted June 1 , a $7.3 million impact
- If lifted July 1, a $9.5 million impact
And that does not include trailing effects, said Rathbun, adding, “We assume a recessionary impact through fiscal year 2021.”
Staff have reviewed programs and identified about $5 million in balancing actions that could be used to adjust the budget for COVID effects.
Those include delaying work on the parking garage at the arena, not executing some capital projects, partially deferring work on the Market Street parking garage, delaying equipment purchases, not signing some contracts, and using some fund balances.
“We won’t understand the full impacts for a couple months. Our recommendation is to avoid irrevocable decisions for at least a couple months, said Gleason. “There are a lot of municipalities that are suffering tremendously. That is not our position today, not to say we couldn’t get to that situation.”
“This is exactly why we spent time and effort building up that emergency fund balance," said council member Jamie Mathy. “So in a scenario where we don’t end up reopening till July 1, we would still be OK. I think there are communities in Illinois that can’t say the same thing. While we are not going to be happy, we would at least be solvent.”
Mayor Tari Renner noted other municipalities might fare far worse because of underlying economic conditions that are not as strong as Bloomington’s.
“Rockford’s estimate was well over $14 million in the next two months,” said Renner. “We’re not in great shape, but we’re in good shape, at least right now.”
Council member Scott Black did some back-of-the-envelope math and said the city has about $2 million in flex, but warned the city must be strategic about using it.
“They do stare at you from the page when you consider every month you are looking at another $2 million deficit,” said council member Kim Bray. “Finally, we know there may be a second event in the fall that’s being projected.”
Staff recommend the council pass the existing $230 million budget proposal before May 1 and make adjustments later.
“We just don’t want to make a lot of decisions now that we don’t have sound information for,” said Gleason.
We’re living in unprecedented times when information changes by the minute. WGLT will continue to be here for you, keeping you up-to-date with the live, local and trusted news you need. Help ensure WGLT can continue with its in-depth and comprehensive COVID-19 coverage as the situation evolves by making a contribution.