Two weeks ago, the mayor’s administration presented an irresponsible and incomplete plan for his revised budget proposal that falls woefully short of what Richmond needs to prepare for the impact of COVID-19 and how it will affect Richmonders.
Families, businesses, and entire sectors of the economy have ground to a halt. Many people have lost their jobs, could lose their homes, and face other hardships. The mayor has failed us because his proposal for the Fiscal Year 2021 Budget (FY21) lacks any sense of urgency surrounding the sharp decline in revenue that will close the FY20 Budget.
This problem is twofold, because not only will services be affected, it does not allow City Council to prepare for next year’s budget, which is due on May 31. His recent Fiscal Year 20/21 (FY21) proposal would reduce next year’s budget by about 5% (-$38.5 million) and is based on irresponsible assumptions on three main points:
First, he assumes revenues from meals tax for instance will fall by only 15%, even though most restaurants have seen drops in revenue of 80%-90%+. Many will not reopen, ever. Henrico cut their expected meals tax revenues by 32% in their newly revised budget. In his April 20 response to Council, the mayor claims that demand will return and there will be “pent up spending demand (including events that were previously scheduled for the Spring being postponed to late Summer/early Fall) which would offset a portion of the reductions.” That is reckless speculation.
Second, he assumes businesses will be back to 90% of their pre-COVID-19 levels by mid-June, just before the new budget takes effect on July 1.
Third, the mayor is legally required to make sure monies are spent as allocated in the FY20 budget. In a crisis – especially a financial crisis – he must take action to make sure the money does not run out or cause a large shortfall. The city’s goal should be proactive financial planning to maximize the money available to help Richmonders during this crisis. The mayor’s business as usual, head-in-the-sand attitude is summed up with two examples:
– First, on March 16 – the same day the President announced the first set of Social Distancing Guidelines – the mayor introduced Ordinance 2020-091 that would transfer $2.1 million of the expected $6.3 million of surplus real estate revenues to the Affordable Housing Trust Fund. He requested no committee discussion and wanted the ordinance placed on the Consent Agenda (meaning little to no discussion). This paper was finally withdrawn at the April 13 City Council meeting.
– The second example come April 13 in the regular Financial Report to City Council with the reported revenues through March 30. The Transmittal Letter accompanying the report dated April 15 does not contain a single mention of COVID-19 or the certainty that revenue projections and percentages would be drastically and negatively affected in the coming monthly financial reports, especially in sales taxes and meals taxes.
Also concerning, the mayor said there will not be an update on current spending until close to May 15 – after most departments usually have stopped spending to reconcile before the close of the fiscal year – and just two weeks before the FY21 Budget is required to be completed.
Real leaders do not get through crises with wishful thinking and rosy revenue assumptions. Pretending all is well is not an option. Too many jobs, businesses, and people’s livliehoods are at stake. Next year’s budget is important, but right now we need to be concerned about the city’s financial status with the current budget.
Will programs and needs in Social Services have enough money to help those in need? Will tax amnesty allow businesses decimated by this crisis time to recover?
City Council can’t discuss and plan next year’s budget without knowing what our current financial situation is, because that will have a direct impact on planning and funding the FY21 budget. The last thing we can afford as a city is to have poor planning and lack of leadership come back to bite us again in next year’s budget and put families and businesses at risk all over again.
So far we can not get answers from the mayor if the administration has done the things most responsible localities have done – stop all new purchases, pause the signing of any non-essential contracts, and halt all discretionary spending for supplies or any non-essential items and equipment until further notice.
The only action we know has been taken is a hiring freeze, which is also a best practice. It is prudent to maintain flexibility and establishing a forecasting system and having contingency plans of various levels (5%, 10%, 15%) will allow us the flexibility to make up shortfalls and apply funds where needed if revenues are higher than anticipated. But in order to make that possible, we need to be responsible and enact best practices as soon as possible related to the current budget.
If we do not, we could see drastic cuts to city schools and city services, employee layoffs and families losing health insurance, and have to pilfer the Rainy Day fund, which would hurt our bond rating and ability to borrow money.
It is time to stop being reactive, or we will get run over. No one knows where this will end and where the bottom lies. We must prepare for the worst and hope for the best, but we have to be responsible and judicious with the people’s money.
– Kim Gray for Mayor of Richmond