“No one knows what the impacts [of the virus] are going to be,” McCarter said.
The city is trying to limit spending to core services for the time being, he said. There will also be an opportunity to adjust the budget in June with Pearland City Council’s approval. At that time, the city may discuss use of the excess fund balance or reallocation of salary savings due to turnover, McCarter said.
Once June comes, the city will also have a better idea of how sales tax revenue has been affected. There is a two-month lag from the time there when sales tax money is collected from businesses and when the state administers it to cities. By June, McCarter said, the city should have the April numbers.
“The March numbers and the April numbers may show the biggest look at what we are doing. Both are going to come in time for the June reallocation, which would put us in the best place for [FY 2020-21],” he said. “Once we see the data come in for a few months, we will see what we are looking at.”
Like Friendswood, Pearland relies on property taxes for most of its revenue. However, sales tax revenue makes up around 25% of the city’s general fund.
Sales tax is the revenue source McCarter expects to be most affected by the pandemic.
“We do expect that money to be affected. I don’t see a scenario in which it won’t be. But we don’t know the extent of that now. We’ll see what happens in the future and be as flexible as we can,” he said.
Per its city charter, Pearland City Council has to pass a budget in August, and it has to be implemented by the end of the year. As such, the budget may be passed before the full extent of the financial effect is known, as this is uncharted territory for the city, McCarter said.
“One thing I think all of us are dealing with is that we are in a really unprecedented time. Even looking at the Great Recession in 2008, we were a very different city then,” McCarter said.
