Bellaire’s finance department put together two fiscal forecast scenarios on COVID’s impact, with Scenario 1 reflecting a return to normalcy in July and Scenario 2 assuming significant impacts on city services as well as revenue and expenses through the end of FY 2019-20 in September.
“The two projections are attempts to help us prepare for both a best-case and worst-case scenario,” city staff wrote in the report. “Reality will likely be somewhere in between.”
The ending fund balance is projected to increase in FY 2019-20 by $1.07 million for Scenario 1 and $967,000 in Scenario 2, according to the report.
Revenues
Largely thanks to over $1 million in reimbursements from the Federal Emergency Management Agency for Hurricane Harvey debris removal, if Scenario 1 comes to pass, the city would be able to walk away from FY 2019-20 with revenue that exceeds the budget, according to the city report. Without the reimbursement, the city would see revenue off by as much as $1.7 million in Scenario 2 or $786,000 in Scenario 1.
The financial effect of COVID-19 will be seen in declines in parks and recreation fees, sales tax and fine revenue, according to the report.
In Scenario 1, Bellaire will see a 27% drop in May, June and July sales tax revenue, which will not be reflected in city finances until two months later, when it collects on those taxes, according to the report. Scenario 2 anticipates bigger drops—a 47% decline in sales tax revenue.
Revenue from parks and recreation programs will get hammered in both fiscal scenarios, “as swimming pool openings will be delayed or canceled, and the annual summer camp program could be reduced or canceled depending on the severity of COVID-19,” the report states.
In the Scenario 1, the city would lose $167,000 in revenue as compared to the budget, and in Scenario 2, it would lose $635,000.
On the other hand, projections indicate Bellaire will see minimal impact property and franchise tax revenue in fiscal year 2019-20 because about 97% of property taxes have already been collected, and the city’s largest franchise taxes, which are related to electricity, are fixed by contract.
Declines are anticipated in permits, fines, licenses and other sources as well.
Expenditures
Bellaire's expenses would come in under budget by $898,000 in Scenario 1 and by $1.7 million in Scenario 2, which the city attributed partially to reduced payroll, maintenance and other costs amid extended shutdowns.
This decrease in expenditures would result from facility closures and program cancellation, from a reduction in part-time labor, from moving the charter election from May to November and from deferring a $471,000 transfer from the general fund to the vehicle and equipment replacement fund.
Council Member Nathan Wesely inquired about whether the transfer would save the city money in the long term.
“We can absorb not having a transfer this year,” City Manager Paul Hofmann said, though he cautioned that such a move should not be done too often.
Council Members Catherine Lewis and Jim Hotze asked about other potential savings.
Hoffman has asked every department to scrub what they do not need. The fuel budget has been reduced, as have travel-related expenses. Building-related expenses and custodial expenses have also been reduced, and the staff is looking for ways to reduce utility costs.
“There are several things we’ve been able to reduce from the budget,” Hofmann said.
