Cobb city leaders are tightening budgets, freezing new hires, delaying pay raises and bracing themselves for major revenue losses as the local impact from the coronavirus pandemic starts to become apparent.
Although city staff have yet to be able to gauge the full consequences of COVID-19, they are planning as best they can to operate on minimal expenditure for the months and years ahead.
“It is difficult to determine at this point in time, but we anticipate impacts in the next two to three years depending on the length of time our economy is impacted,” Powder Springs Manager Pam Conner told the MDJ on Friday.
Other city leaders in Cobb indicate similar outlooks.
“Despite our strong financial position, the current health crisis has the potential to negatively impact our budget,” Kennesaw Mayor Derek Easterling said. “Consequently, we have taken some immediate actions to reduce city spending.”
Among the cuts were temporary layoffs for 23 staff, Easterling confirmed Friday.
Smyrna leaders hosted a video conference Thursday to hear from Finance Director Kristin Robinson, who reported an estimated $1.8 million in revenue losses for the city for fiscal year 2021, representing about a 20% loss across most income streams including property and alcohol taxes, business licensing and fees for activities, programs and recreation resources.
In addition, Robinson said the city would likely lose almost $330,000 in hotel and motel taxes, meaning about $133,000 in reserves from that fund would have to be used to balance budgets.
Smyrna should use an additional $500,000 in reserves from its $18 million general fund to balance the books, given the $1.8 million projected revenue losses, Robinson said.
In Marietta, city leaders plan to hold a special budget meeting at the end of the month, Mayor Steve Tumlin told the MDJ, expressing confidence in the city’s position.
“One key for Marietta is our many sources of revenue and a solid financial position with strong reserves to call upon to maintain as close as possible our current high level of service,” Tumlin said. “Debt to maintain operationally is not necessary.”
Acworth city staff have been actively monitoring all revenues and expenses since the onset of the pandemic, Mayor Tommy Allegood told the MDJ.
“To date, we are only one month into this pandemic season and our receipts for revenue sources lag about 30 to 60 days of their receipt,” Allegood said. “So at this time all we can do is begin to estimate the pandemic impact on our budget.”
Acworth’s fiscal year begins July 1 and ends June 30, so the city is now a little over 75% through its current fiscal year.
Property taxes have already been collected for the current fiscal year, Allegood said.
“We have frozen all hiring, training and travel and we are planning to hold expenses to a minimum in all departments,” he said. “We know the impact of businesses being closed and the impact of shelter in place is going to impact our current operating budget.”
The city will start its new budget process in May, Allegood said.
Mayor Ollie Clemons says hazard pay for police, fire and other front-line and essential emergency personnel is a financial impact already being seen in Austell due to the pandemic, as well as overtime for special patrols in the business districts.
The city has also purchased protective equipment and sanitation supplies, and harbored some costs associated with staff working from home, he said.
“Future impacts will be the delays in cash flow from utility payments, Threadmill (complex) office rental payments, business license renewals, as well as the possible suspension of all service charges and late fees,” Clemons said, further citing a reduction in SPLOST receipts resulting from less sales tax.
The city will pursue any available grants or funding, Clemons said, adding the cost of operations due to the pandemic is approximately $25,000 a month, not including SPLOST impacts.
Austell has healthy reserves, the mayor said, “so that once COVID-19 restrictions are over we anticipate the impact to our citizens to be minimal.”
Austell does not share the same hotel/motel tax concerns as some cities, because it only has a handful of such facilities in its jurisdiction, Clemons said.
Mayor Easterling said the city is in a strong financial position and has collected nearly 70% of its budgeted general fund reserves for fiscal 2020 with six months remaining in the current fiscal year.
“We are working every day to closely monitor our financial situation to ensure that we preserve our current fiscal stability – a position the city has worked hard to develop over the past few years,” he said.
The city has placed a hold on hiring and suspended all recruiting activities for the rest of FY20, Easterling said.
Accordingly, department directors have been asked to develop operational plans “to do more with less staff,” and this includes staff working across departments and sharing equipment “to safeguard the continuity of operations while ensuring customer service and facility maintenance is maintained at a high level,” he said.
The city suspended all business-related travel for the rest of FY20, including for conferences, business meetings and professional associations.
A hold has also been placed on all capital expenditures.
“All purchases that are not critical to the operation of our departments have been suspended,” Easterling said, adding all staff realize their responsibility as stewards of public funds. “Each department director has been asked to review their respective budgets and to make recommendations to further reduce expenses. Each member of our team is working diligently to provide the continued delivery of essential services and in upholding our fiscal responsibility during an unprecedented time.”
Marietta plans to host a special called meeting to review the city budget on April 28, Mayor Tumlin said.
All operational and SPLOST budgets are being examined “for revenue retrenchment and maintaining services,” he said.
“We are analyzing both the short term effect and the unknown long term,” Tumlin said. “We will incorporate this in our ongoing budget for 6/21.”
The city had a “very strong” first nine months of the fiscal year, Tumlin said, adding the city may use some “rainy day reserves” to offset unbudgeted revenue loss.
Staff estimate an unbudgeted expense of around $75,000 for personal protective equipment, communication tools and additional cleaning from March through early fall as a result of the coronavirus pandemic, and will seek federal assistance for this.
Manager Conner said staff are working on the city’s budget and plan to share more information soon.
“It is difficult to quantify the impact at this time although we do anticipate an impact on revenues,” she said, offering comparisons to the housing crisis of the Great Recession.
Conner said the city saw an average annual reduction in revenues of about 5% between 2010 and 2014, with property tax the main source of revenue.
“For the upcoming fiscal year, our property tax revenue is expected to see slight modest growth given that it is based on valuations as of January 1 prior to the pandemic,” Conner said. “However, we also expect an increase in exemptions due to the float, and we expect other revenue sources to be impacted by consumer decisions. As we move forward in the new fiscal year and beyond, we will need to be prepared to adjust our projections.”
Conner said she did not anticipate cutting any city service of personnel at this time, and she hoped to attract more commercial development to boost revenues.
Projects already in the pipeline will continue to completion and any new project will be carefully examined.
City staff are investigating opportunities to receive state and/or federal funding and all departments have been told to cut expenses as much as possible.
Some planned expenditures, including staff raises, have been postponed.
“As a result of these declining revenues, even as we cut expenses to the extent possible, we anticipate the city will fall short of targeted year-end numbers and may have to make use of reserve funds to cover expenses through the remainder of the fiscal year,” the city said in a statement to the MDJ.
Finance Director Robinson said the city’s health insurance had increased by about $500,000 and she is waiting to hear back on the city’s required contribution to the pension plan.
“Right now it looks like we are going to have to use maybe half a million dollars of our reserves to balance the budget,” she said. “We haven’t had to do that in a very long time. We are going to have some lasting effects of this shutdown and revenues are going to suffer.”
City budgets show just over $1.8 million in revenue losses in FY21, including $520,000 in property taxes, almost the same amount in ad valorem and alcohol taxes, just over $250,000 in activity, planning, recreation and program fees, and $135,000 in alcohol and business licensing.
Robinson suggested the city use $500,000 of reserves in the city’s general fund, totaling about $18 million to compensate.
She also suggested the city use almost $140,000 of reserves in the hotel/motel fund, totaling between $800,000 and $900,000, to offset expected losses of about $327,000 in hotel/motel tax.
Merit raises for city staff, including for public safety personnel and paramedics, have been pushed back to the start of 2021. The city estimated the merit raises to cost around $600,000 annually. There is no raise planned for the mayor or anyone on the council.
“If things change and we’re not able to do that, then we have that discussion then,” Mayor Derek Norton said of the January raises. “We don’t know how long this is going to last, what the impact is, in a few months we’ll have a bit better idea.”
“Reserves are set aside for this very reason,” council member Charles Welch said.
This article was updated on April 20.