Worst case scenario, projections indicate Great Bend could see sales tax revenue plummet 25% due to the COVID-19-induced economic slow down, but City Administrator Kendal Francis believes the hit will be substantially less grim.
Either way, he told city council members meeting Tuesday night for their initial 2021 budget planning session, the city will emerge in good shape. The meeting, held at City Hall, was streamed live via Facebook.
“Even if we were to see a 25% reduction in sales tax, we can cover that shortfall without substantial cuts to services,” Francis said.
Francis met with department heads Wednesday to start compiling their budgets. A first draft of the a budget should be ready when the council meets for another planning session in about a month.
“I’m not trying to make light of it, but it’s manageable through fairly normal means,” Francis said. “We’re not looking to slash budgets, and my staff is always very conservative.”
He was referring to city’s 1/2 percent city sales tax. This is split three ways – 45% for capital improvements, 20% for economic development incentives, and 35% property tax relief.
He presented figures for a 15% reduction, a 20% reduction and the 25% “the world’s coming into coming to an end type of projection.”
But, “what I believe that we need to be looking at and planning for is a 15%,” he said. “I think 15 is probably still conservative, but I’d much rather be more conservative and be surprised at the year if we have more money.”
A 25% decrease means $836,000 out of the general fund budget. At 15%, it is still a $546,000 change.
For capital equipment-infrastructure, there would be a $207,000 reduction at 25% and $124,000 at the 15% level. For economic development, the reduction would be $92,500 and $55,500 respectively.
In Kansas, the state disburses sales tax two months in arrears, meaning the most recent disbursement was from February. “At that time, we were still ahead of revenues last year by about $4,000.”
So, “the more we began to look at this, we realized that 25% would equate to receiving zero sales tax for three months of the year, which didn’t seem real,” he said.
The city also has a quarter cent sales tax dedicated to street improvements. There would be about $230,000 reduction at 25% and $138,000 with the 15%.
There are also revenues come from the liquor tax, fees, police fines, attorney fees, and other sources. These will see a similar decline, “but, we don’t have a clear estimate of what they’re going to be.”
Another piece is the 6% transient guest tax applied to hotel rooms. “We didn’t have a good feel as to where to put that reduction,” Francis said.
City officials went with a 50% drop. “That is as bad as it’s going to get because we have already received 50% of our projected revenues for the year and we had good collections until the pandemic hit.”
One percent of it funds the Events Center. The center also receives revenue from rentals and events, so there will be a hit due to it being closed and having events canceled. The balance funds the Convention and Visitors Bureau.
Now, the good news
“It sounds a little worse than it is,” Francis said. “There’s some low-hanging fruit in our budget that will allow us to make up a majority of that revenue shortfall.”
He ran through a list of areas for savings:
• First, an assistant city administrator position and a public lands position remain unfilled. Not filling these saves $98,000.
• There are also additional unbudgeted revenues.
There’s a $17,923 stimulus payment for Emergency Medical Services, and interest income ($130,000 budgeted for this year) and delinquent tax income ($60,000 budgeted for this year).
These figures could be higher. “So that helps make up that shortfall in quick order,” he said.
• Keeping the Wetlands Waterpark closed would have saved $75,000, but it was determined to open the facility.
• “Year-end transfers and contingencies are the next area,” Francis said. In most years, these total about $450,000.
“We have some continuous line items built into our budget,” he said. “So when emergencies happen, we have some funds set aside that we can address those.”
The city socks away some of this to address long-term, costly projects, such as a new a $3 million police building, technology upgrades, repairs at the sewage treatment plant and lift stations, repairs at the fire stations, improvements to the hike and bike path, lighting at ball fields, maintenance at the drag strip and Expo Complex and an upgrade to a 800 megahertz radio system. These are all $500,000-plus endeavors.
He shaved a little off of each. Savings can be found without tapping funds already encumbered for assorted big-ticket projects, he said.
He also assured the council needed upgrades at the treatment plant and to city streets would not be impacted. And, he said lighting at ballparks would go on as planned as well.
The transfers aren’t addressed until the fall and are approved by the council at the last meeting in December.
• In economic development, shortfalls are relatively easy, he said. June Jaunt has already been canceled, there is a $100,000 budgeted for a housing project that will not happen this year, and the city will not need to fund the Great Bend Chamber of Commerce after the city took eco devo in-house.
• Capital equipment and infrastructure are pretty sizable, Francis said. They have been setting aside $200,000 a year for a new, $1 million fire department aerial ladder truck, and that can be put off for a year.
This leaves only a little to make up and savings could be found in residential street repairs without compromising the on-going street improvement effort.
And then the other street project officials talked about was a resurfacing of Broadway starting at Patton Road. That could also be postponed.
• CVB Director Christina Hayes has gone through her budget and found about $140,000 in savings.
• There are also other purchases that can be delayed until the end of the year. “Then if the money’s exists, we can go ahead and make those purchases.”
• There will also be savings citywide in travel and training expenses
There will also likely be a drop in the amount of property tax money the city receives, Francis said. Great Bend usually gets around $4-5 million.
These are collected by the county and the numbers won’t be known until June, he said.
However, valuations were down last year, meaning the city’s portion took a hit then, and they will probably decline this year as well due to the pandemic.