These numbers are preliminary, given the ever-evolving impacts of COVID-19, said Susan Morgan, the city’s chief financial officer.
“We do not know the depth of what’s going to happen, and we don’t know how long this is going to go on,” Morgan said. “Those are pretty big unknowns. We’ve done a detailed look, but it’s going to change. We accept that.”
With many local businesses shuttered or operating in a reduced capacity, Morgan estimates sales tax revenue to drop by $5-6 million for the remainder of the fiscal year. This represents a 10-11% decrease over the budgeted projection for FY 2019-20 alone, she said. Annualized, the decrease is closer to 30%.
Compared to projections from the city of Austin and the city of Fort Worth—two other Texas cities that have recently shared their projected data—Round Rock is anticipating a similar scale of sales tax revenue loss, Morgan said.
Minimal impacts are anticipated to property tax revenues, as appraisal districts are required to assess property values as of January 1.
However, Morgan anticipates hits to other revenue streams, such as a drop in fee collections from city-owned facilities that are currently closed, including the library and the Clay Madsen Recreation Center; a slowing of parks and recreation revenues during the typically busy spring and summer season; and a dip in mixed beverage tax revenues, with bars and the dine-in portions of restaurants currently closed.
But likely to be hardest-hit, Morgan said, is revenue from tourism. March to June is historically the peak season for tourism in Round Rock. But this year, four hotels—for a total of 608 rooms—are currently closed. The ones that remain open are reporting occupancy rates less than half of normal, Morgan said.
“We usually see an 80% bump this time of year, and of course they’re all closed,” Morgan said.
“We are expecting a very hard hit.”
Per the city’s budget contingency plan, Morgan outlined steps the city could take to reduce expenditures to help offset projected losses.
Her proposed general fund reductions include a $4.3 million cut to neighborhood street maintenance, a $1 million reduction across department operations and $1.3 million in savings by instituting a hiring freeze for 30 of 38 vacant positions.
With these types of reductions, Morgan said, the city would be able to balance its general fund budget without having to consider “last-resort” measures of laying off staff or dipping into the city’s reserve funds.
“We will now have a balanced budget through the end of the year,” she said. “It’s greatly reduced. It’s going to be tight, but we can still accomplish priorities. We’ll learn a new normal going forward.”
Other cost-saving measures Morgan proposed to city council include placing a few capital projects on hold. Proposals include those projects that have not yet begun, such as Behrens Ranch Park. However, Morgan said she is not proposing a delay on bond-funded projects such as the library or the trails or transportation improvement projects in the city’s 5-year plan.
“We have contingency reserves. We have debt reserves. All of those will stay fully intact,” Morgan said. “We do not need to dip into those at this time.”
Morgan is expected to propose a budget amendment to council on May 14. Next steps for her staff include continued monitoring of revenues and reviewing cost reduction opportunities, she said.
“This is extremely serious,” Morgan said. “But I think we’ve got this. We can do this and we will keep this city in good condition going forward.”
Council members commended Morgan and her staff for their work on developing projections quickly and with limited data.
“Hopefully we can start a recovery sooner than what might be expected,” Round Rock Mayor Craig Morgan said. “We will get through this. We will do everything we can to make sure our business community and our citizens can get back to some form of normalcy.”