Until we weren’t. Until the economy shut down to try to stop, or at least slow down, the spread of the deadly coronavirus. Bottoms fell out everywhere after a pandemic was declared. And Duluth City Hall was not spared.
The mayor and members of her administration are expected to offer a fiscal update to city councilors today. It won’t be pretty. To say the numbers are grim would be like saying Carrie got a spot of blood on her prom dress. Our city’s current budget realities and projections are downright shocking. Frightening even.
“The (city) budget is not one that makes sense anymore,” the mayor stated about the 2020 spending plan approved by councilors just five months ago that now may as well be tossed in a fireplace.
Those sales tax receipts: they plummeted 26% in February, year to year. For all of 2020, they’re now expected to be down 50%, Larson and Chief Administrative Officer Noah Schuchman reported. Their grim estimate was reached after consulting with economic experts from the state. It means $7 million instead of $14 million for the city’s general fund, the pot used to pay for everything from police and fire protection to planning, economic development, technology, and more.
“That’s a big hole,” the mayor understated.
Sales taxes had also been expected to generate about $7.5 million for Duluth’s street improvement fund. Only about $4 million are expected now.
“We still are committed to getting 16 miles of road work done this year, though, because we began collecting that sales tax on Oct. 1 of last year, and we have dedicated revenues within the general fund that go into the street fund,” Larson said. “We still will do street repair. … But it will not be what it could have been.”
Tourism tax collections are expected to drop, too, by as much as half this year, from $12 million to between $6 million and $9 million.
Nearly a fourth of the city’s $92 million general fund budget comes from property tax payments. St. Louis County has informed the city to expect about $18 million, rather than the budgeted $22 million, because many residents are losing their jobs and simply can’t pay. The county has processed 18,000 unemployment claims since March 15, compared to 800 during the same time period last year, Larson and Schuchman said.
Exacerbating so many revenue losses — and these were just a few — unanticipated and unbudgeted coronavirus-related expenses are expected to mount, and only some of them will be reimbursed by the federal government. Those expenses are forecasted to include $3.8 million for workers comp, $3.5 million to cover emergency sick leaves, and $100,000 for personal protective equipment and technology so employees can work from home.
All of which has led to some difficult decisions — with more to come, unfortunately. A couple weeks ago, the city laid off about 45 seasonal and temporary employees. Last week another 49 were let go. In addition, 18 to 20 city jobs are being held open under a hiring freeze. So that’s close to 120 positions, from a workforce of about 860 full-timers, impacted by COVID-19. In addition, the Lester Park Golf Course won’t open this year, among other moves to cut costs.
“Our layoffs are so hard. Those dedicated public servants, it’s really tough to have to lay them off, and I want to just make sure that I’m acknowledging the impact on them and their families,” Schuchman said. “There’s no playbook for this. We cannot look to previous experience with a pandemic. Even if we had people who had been around during the flu epidemic (in 1918), the world has changed so much that it would not be applicable.”
The bottom line financially? The prom scene from “Carrie” comes to mind again. Clearly, the city’s spending plan will need revising and updating. But it can’t happen yet.
“We don’t know when this merry-go-round is going to stop,” said Schuchman. “We’re trying really hard to balance and take steps that safeguard the city’s budget while also not going too far and impacting things we don’t need to — until we do.”
“Everything that we have done so far has been with thoughtful consideration,” added Larson. “They haven’t been decisions we’ve loved to make, but they are the ones we have chosen to make, because we believe there is a path out of COVID-19.”
Even if it won’t be pretty.
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April 26, 2020 at 01:00PM
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Our View: Duluth's bottom line looking downright grim - Duluth News Tribune
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