Steamboat council makes cuts in face of projected $3.5M to $4.5M budget shortfall
STEAMBOAT SPRINGS — Steamboat Springs City Council went into more detail Tuesday night about pending budget cuts it will be making in response to a projected sales tax shortfall of $3.5 million to $4.5 million in 2020 due to the COVID-19 pandemic.
Of the city’s $41 million general fund budget, approximately $27 million, or 65.8% of total revenue, come from sales tax.
Steamboat Springs Finance Director Kim Weber said she looked at various scenarios to calculate the $3.5 million to $4.5 million shortfall range, but she acknowledged no one really knows what the future holds in these uncertain times.
To brace for the loss in revenue, all exempt city employees will see a 10% pay reduction starting April 12, and all full-time hourly employees will go to 36 hours a week. Positions excluded from the adjustments are law enforcement, animal control, community service officers, bus drivers and fire and emergency medical services.
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In addition, all city facilities, including City Hall, Centennial Hall, Parks and Recreation offices, the lobby of the combined law enforcement facility and the public works, streets and fleets shop, will be closed on Fridays beginning April 12.
The council also requested members take a 10% salary cut, and council member Sonja Macys urged looking further into the council’s budget for more “meaningful cuts.”
The only cut Weber recommended that council rejected was eliminating night line bus service after about 7:30 p.m. for the summer.
That would have saved about $150,000, but the majority of council members expressed a strong desire to keep the late buses running for essential workers and restaurant and bar workers when businesses can open back up to full capacity.
“It’s too crucial for the community not to have transportation,” said council member Michael Buccino.
Several council members expressed concern Weber was being too optimistic in her projections, especially predicting that restaurants and retail would be able to average 40% of normal sales from April through November.
“I think we need to cut a whole lot more,” Macys said.
Weber said she made her estimate based on the assumption that summer would be down, but things would rebound for the rest of the year.
Weber predicted lodging would be down 90% for April but would improve to 40% for May through December.
Her estimates on grocery stores were showing sales up 10% — the only positive number on the list. She estimated liquor stores down 3% for the rest of the year and marijuana down by 5%.
In total, she estimated a 15% downturn in sales tax revenue, which would amount to $4.1 million. January, February and part of March were strong, she noted.
Weber thanked each city department for working to find where they could cut in an “all-hands-on-deck approach” — resulting in about $1.6 million in reductions.
“These are not easy cuts,” she acknowledged, adding the budget had already been scrubbed to get it balanced. The deepest cuts came from the city manager’s office, public works and parks and recreation.
The city does have about $14 million in general fund reserves it can use, but Weber said it would quickly go through that amount without making cuts now. And, there is an obligation to build those reserves back up the following year, and no one knows what 2021 will look like, she said.
The city has just over $9 million in the budget stabilization reserve and just over $5 million in the residual fund balance, which Weber described as a savings account.
Policies require the city to retain 25% of the prior year’s expenditures in budget reserves for times like this, Weber said. That amounted to about $9 million in 2019.
Weber recommended dipping first into the $5 million bucket and avoiding the $9 million fund over concerns of how the city would replenish those monies next year.
The city was planning on using about $2.7 million of those reserves to build the new fire station.
With $1.6 million in cuts made across departments and $900,000 in cuts to payroll, that leaves about $1 million to $3 million that would need to come out of the reserves, given the $3.5 million to $4.5 million shortfall range.
In terms of capital projects, Weber requested leaving $750,000 for projects already under contract or underway, and she presented council with a list of capital projects to be delayed or reduced for now.
The council agreed to view this round of cuts as “phase one” and consider additional cuts in the coming months. Council members requested a detailed budget update monthly.
Some comparisons were made to budget cuts made during the 2008 recession, but differences were also noted.
“I think this is a whole different type of devastation we are seeing,” said council member Heather Sloop.
Council member Kathi Meyer said she felt Weber’s budget shortfall projections were too optimistic.
“But I hope I’m wrong,” Meyer said.
Council member Lisel Petis urged the council to think differently from the response to the 2008 recession, so that when things do open back up, the city is in a position to help stimulate the economy.
“We know we are in a sharp economic retraction right now,” said Council President Jason Lacy, “We just don’t know how long it is going to last.”
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