The city of Walla Walla will cease travel, hiring and new projects to mitigate the financial impacts of COVID-19.
Deputy City Manager Byron Olson, who tracts and analyzes city sales tax by geographic location, estimates a reduction in city sales tax between $1.5 million and $2.2 million. That range is between 22% and 38% of sales tax funds, Walla Walla City Manager Nabiel Shawa relayed during Wednesday’s Walla Walla City Council meeting.
A 27% reduction, or $1.85 million, is most likely, he said.
The city’s 2020 budget before the impacts of the COVID-19 virus and including every fund was $130 million, Finance Director Jean Teasdale said.
Of that, the general fund accounts for $30 million. One-third of the revenue for that budget comes from sales tax, which is currently impacted by the governor’s stay-home order.
Mayor Tom Scribner said the city typically receives $9-$10 million in sales tax.
The city’s general fund is made up of budgets for police, fire, parks, library, administration, finance, human resources, legal, council activities, text services and more, Shawa said.
“It is going to be difficult at this early stage to have any firm or reliable estimates on the impact,” Shawa said. “The financial impacts are just currently unknown.”
“People are still spending money, they are just now spending in different places. We would likely see increases in grocery stores and hardware stores,” Shawa said, noting tax exemptions at grocery stores don’t exist on nonfood and certain other items.
“There is a whole bunch of items in grocery stores that people are hoarding, that we will receive sales tax on,” Shawa said.
Ceasing all non-essential travel and training, except for trips to Olympia and Washington, D.C. to advocate for financial resources, is part of the budget reduction plan, the city manager said.
Current ongoing projects will be continued, but new projects will be delayed if they have minimal impact, he said.
A hiring freeze will take effect. When a city employee retires or gets hired for a different job, the city will not automatically replace the position.
Leaving four to six employee positions open will give the city around $30,000-$36,000 a month in savings. Over six months, it allows revenues to accrue. This will not affect vital positions, Shawa said.
Information on positions that will remain open was not received by press time.
The city has no plan to terminate personnel or lay off employees.
“We are not prepared to go there and that would be an overreaction at this point,” Shawa said.
Planned equipment replacements will be reduced and vehicle life will be extended by one year, he said.
The budget reduction approach is consistent with the advice advocated by the Municipal Research Services Center’s Finance Analyst Mike Bailey.
On Monday Walla Walla County commissioners told all departments to cut their budgets 5-10%.
Shawa said the city’s approach is different because the City Council and the city manager have more control over the budget and department spending.
“You may have functions or departments that operate with much thinner margins. They couldn’t sustain that type of hit, and on the opposite end of the spectrum, you may have other activities and departments that may have more ability to absorb the hit,” Shawa said.
The state has been recognized by the federal government in the COVID-19 disaster, and local governments are eligible for reimbursement. All departments are recording costs of COVID-19 and forwarding them to the Federal Emergency Management Agency.
Some emergency funds will be used to absorb the financial shock, and the city may dip into its $3.9 million reserve fund, which is 11.41% of the general fund for 2020, Teasdale said.
“I certainly do not want to see us drop below 10%. On an intermittent basis, we may dip a little below that,” Shawa said. “We have a reason for hope, that the federal government will provide some level of local government assistance in the next CARES bill to help us reduce the impacts.”
Councilmember Riley Clubb said the Council will reduce the impact by 75% and the other 25% will be reduced by using reserves and federal or state assistance.
“If this turns out to be a nine-month situation, unfortunately, we may be forced to take additional actions down the line,” Shawa said.