With revenues down and cuts in all but two departments, the city of Richmond is having to dip into its reserve fund in order to combat a nearly $3.3 million deficit as a result of revenue shortfalls.
Richmond City Manager Rob Minerich, along with Sharon Cain, the city’s finance director, went through the fiscal year 2021 proposed budget of $28,671,692 via teleconference with the city’s mayor and commissioners.
This budget proposal is almost $2 million short of the previous fiscal year’s budget.
“This year has been especially challenging as we, like the rest of the world, navigate the novel COVID-19 virus and the effects on the national, state and local economies,” Minerich shared in a budget message.
The primary driver for the unexpected shortfalls in revenue is attributed to the coronavirus pandemic, which shutdown restaurants and kept employees at home, all of which impacted the tax revenues expected.
According to Minerich and Cain, the city’s revenues are heavily concentrated by the payroll tax, property tax, net profits tax, insurance premium tax and utility franchise fees.
With the exception of net-profits, the duo reported a lowered projected income of 24% from the major sources.
Minerich noted a 23.68% decrease in the payroll tax line item, attributing the loss to lack of employees in the workforce with everyone either let go or furloughed.
“Right now, it is uncertain, because it is uncertain when they will return back to work,” he told the commission.
The general fund property tax revenues declined 0.59%, which Cain attributed to a lack of collections in the tax, as some residents could not afford to pay with perhaps being out of work.
However, there is some slight reprieve in the fiscal year 2021 budget with a delay in the collection of net-profit taxes in conjunction with federal and state guidelines with a three-month extension for filing.
Because of this, $700,000 will be pushed from the fiscal year 2020 revenue to the next year seeing a 20.40% increase.
As a result of a “considerable decrease” in revenues, as Cain called it, all but two departments saw their budgets cut, as well as capital outlay projects, which department heads presented to Minerich and Cain.
One of the departments seeing the largest reduced expenditures is the Parks and Recreation Department with a 17.36% decrease to its overall budget, and a decrease of 51.06% to capital outlay and projects.
Minerich reported the department operates with 19 full-time employees and one vacant position remaining, which was reduced from three open ones.
Additionally, the department was combined with the Parks, Grounds and Maintenance Department, which Minerich reported was a more efficient combination.
“You are starting to see a theme where we allowed the departments to receive the things that were essential, but we really had to tighten our belts,” Minerich said.
One example would be the Richmond Police Department, whose capital outlay was reduced by 18% this fiscal year, which would have been used to purchase 10 new cruisers.
Although 10 new cruisers were reported not feasible in the current climate, Minerich approved budgeting for five new vehicles each year.
“This will allow us to stay on a consistent basis of five cruisers per year so that they are able to have a consistent fleet,” he said.
Richmond’s Administrative Department also saw cuts. Several positions were eliminated and transitioned previously out-sourced projects to be done internally.
Both the Finance and Information and Technology departments saw increases, having added employees to their rosters.
And while both Cain and Minerich were comfortable with getting through this fiscal year having previously been financially sound, and able to get through with reserves, the two expressed concern down the road in regards to the growing pension liability.
“In the next five to 10 years, if they do not pass something in the legislation to relieve a bit of that or stretch it out in the future, we will definitely have to take into consideration (drastic changes and operations),” Cain said.
This fiscal year, the city will contribute 24.06% of gross salaries for pension expenses of non-hazardous retirement pay, and 39.58% of gross salaries for those with hazardous duty employees, which are the same as the previous year’s contribution.
The percentages were frozen in an act based on a legislative amendment that came in the late 2020 session to assist cities as they cope with losses in revenue because of coronavirus.
Currently, the expectations are a 12% increase over the previous year and will restart again in fiscal year 2022 based on the previous year’s rates.
The cost of both non-hazardous and hazardous pension expenses for this fiscal year are budgeted for $1.1 million and $2.8 million respectively.
However, projections based on current head counts and a 4% annual increase in contributions could bring the city’s total amount to more than $15 million in the year 2030.
“In just one year alone, it would be $15 million, just for one year,” Cain explained. “...Yes I do think we have to be conservative, and we have to look ahead.”
In doing so, Cain pointed out that once demilitarization ceases at the Blue Grass Chemical Activity Pilot Plant, the city will see major fallout from that with tax revenues.
Commissioner Jason Morgan said he would prefer to prepare now for the impact, rather than later.
“Soft landings are better than hard landings,” he said.
“Commissioner, if I may, I couldn’t agree more,” he said. “And I think it is important to get our economy going again because we were really bustling along, and now it has just taken a 180, and I think for us to survive the next 10 years, it has got to be growth.”
Minerich told the commission the city was lucky to be in its position by pulling money from their funds to be able to balance their budget for the coming fiscal year.
“When I talk to other city managers across the state, they don’t have that luxury,” he said. “They are having to make much more tough decisions than we are, and for that, we should be fortunate.”
The first reading of the proposed 2021 budget is scheduled for June 9 during a city commission meeting at 6 p.m. broadcasted over the public access channel 377 or on the city’s Facebook page.
Reach Taylor Six at 624-6623 or follow her on Twitter @TaylorSixRR.