Many events not happening for 2020
At a special meeting of the Windsor Town Council on April 22, the grim realities of the economic impacts of COVID-19 and the subsequent shelter-in-place orders were plain to see in black and white. Town staff collaborated on a presentation for the council detailing the $6 million shortfall for the next two fiscal years the town was facing, and a fairly aggressive set of plans and cuts to deal with those impacts.
“This is a very difficult exercise. This is not a situation that has occurred before that we have a playbook for in planning a budget response,” said Town Manager Ken MacNab. “The situation remains very fluid, we don’t know the duration of this and we won’t know the full extent of economic impacts for a while, so we don’t have all the data we’d like. We’ve taken a somewhat conservative approach in our forecasting or predicting it is just a prediction — a hypothetical scenario — we are going to plan for with council tonight.
“The shelter-in-place order largely remains intact through June — that’s our assumption. In July and August we see loosening of restrictions, and in the fall a return to normal life, normal behaviors and normal patterns and by January a return to back to normalcy,” he continued. “We know that scenario will be different, the way it plays out, but that is the basis of this forecast, which goes throughout the remainder of this fiscal year, and next year through June 30, 2021. I also wanted to point out that about a year ago when we were considering the budget (we anticipated) the start of a recession during this current budget period so, it was already pretty lean. There was not a lot to cut.”
Facts and figures
The presentation, which was given jointly by MacNab and Jeneen Peterson, administrative services director for the town, started with some bleak information.
The average total budget is $20,111,850. That comes from property tax ($7,925,084), sales tax ($5,274,026), transit occupancy tax (TOT) ($2,587,807), franchise fees ($1,678,500), charges for service ($662,050), licenses and permits ($774,250) and miscellaneous ($1,210,133).
“The lion’s share, 40%, is from property taxes, and 25% is sales and TOT is 10%,” said Peterson. “We prepared a high-level forecast based on discussions with colleagues, reading analysis by industry experts and attending a lot of economic updates.”
She then proceeded to share the town’s sales tax consultants expect for the second quarter of 2020 that restaurants will see a 60% drop, consumer goods 50%, fuel 50% and building 40%.
According to Peterson, current hotel occupancy is below 5%, and a continued significant decline of 80% is expected from April through June, with low occupancy continuing through September. For miscellaneous and charges for service, which includes recreational classes, facility rentals and building permits, the town anticipates a 50% reduction in revenue in fiscal years 2020 and 2021.
“We have an estimated revenue gap of $6 million,” Peterson finished grimly, adding that the deficit for fiscal year 2020 is $3,095,00 and fiscal year 2021 is $2,925,000.
The plans for overcoming the shortfall fall under four categories: project and program reductions (~$2 million), use of operating reserves (~$2 million), use of stabilization funds ($1 million) and employee concessions (~$1 million).
“We want to focus on reductions that have ongoing returns, not just one-time returns,” Peterson said. “Because we don’t anticipate returning to normal immediately and we will have drained our reserves, so we will need a three to five year plan to replenish our reserves.”
Painful cuts
MacNab led the section on detailing the cuts. The administrative services department is projecting cuts of $133,000, “mostly internal programs and studies proposed to be postponed,” MacNab said. In specifics, the town wide risk assessment, a cost allocation study, a business process review and computer refresh and upgrades will be either canceled or postponed.
Community development is facing a $345,000 reduction, most of that coming from the delay of a zoning code update, due since the rewrite of the general plan. It was slated to cost $200,000, but the town is hopeful that they may be able to fund more limited update focusing on housing compliance with a $150,000 LEAP grant. Other cuts include professional consultant services, training and professional development for staff and the planning commission and plan check services. The last item doesn’t mean there will be no more plan checks, rather they expect volume of submissions to drop off such that all checks will be able to be done in-house, rather than paying an outside agency to assist.
The economic development department will cut two items totaling $75,000, and economic strategic plan and the Sagan Fondo Bike event, which is likely going to be cancelled anyway.
Human resources was described as one of the leanest departments already, and the only one not to receive staffing or budget increases in the past year, so they are being cut $55,000, by postponing or cutting trainings, labor negotiations, EOC equipment and supplies and job description updates. MacNab also said that employee service awards and recruitments could cut another $20,000 but they were hoping not to have to do that.
The department facing the largest cuts is the Parks and Recreation department. Their cuts are so significant, that they were broken out into three separate categories.
Under the heading of parks and facilities, $132,000 will be saved by pumping the brakes on community center stage lights, library carpet replacement, park structure improvements, contract services (primarily an outside crew that does a lot of hand and maintenance work that is labor intensive and supplemental), training and additional janitorial cleanings.
“(This next one is) probably of most interest to the council and community, our recreation items,” said MacNab. “These are the things which our community really loves and which define us the most as a community. We have the town grant funding, and we are proposing that the level be reduced to only include organizations that provide housing, food or human-related services like mental health. We are planning to suspend most of the Summer Nights on the Green concert series, with the possibility of concerts later in the summer, same with movie nights and Kaboom!, so we have some savings there, along with some programming and class reductions.”
However, he hastened to add, “this is just through the end of the calendar year, this isn’t suggesting canceling these items for next summer.”
In total, the recreation cuts will be $311,840, including cuts to town grant funding, community partnerships, professional services, Summer Nights on the Green, Movies on the Green, Kaboom!, children’s programming, teen/adult programming, (like the concerts and movies these are not permanently cancelled, rather not able to be held this year due to COVID-19), contract instructor classes and training and miscellaneous administrative costs.
The final category is capital projects, which will receive $165,500 in cuts, including postponing or cancelling projects to renovate the senior center, add LED lights to the tennis courts, purchase a new van and have a town arbor assessment done.
Police department savings are coming mostly in overtime savings with the cancellation of most summer events, however the $36,100 in cuts also include cuts to training, administrative costs and mobile equipment.
There are some cuts coming for the public works department, though not as significant, because much of their funding comes not from the general fund, but the enterprise fund and is therefore less impacted by loss of revenue. Their $211,000 cuts will come from storm water program deferrals, postponement of Faught Creek trail improvements and Starr Road sidewalks and cancellation of meeting, travel, conferences and trainings.
No department is immune from cuts, and the last ones belong to the town manager/clerk’s office.
“These are some tough ones,” MacNab admitted. “As the council is aware we have some lobbyists active right now on our behalf trying to secures CARES Act funding for us, and at the state level. We’re also postponing the civic center feasibility study, as the developer has requested that we defer the exclusive negotiating agreement for now. In addition, a new contract for animal control services will be coming forward to council, and it will save us $84,000 over the previous one. We are also suspending work to position the Bluebird Drive property for development.”
Other cuts were proposed to include Blais and Associates grant finding work, the Chevron easement acquisition, training and professional development, as well as organization and team building, along with cutting loose an AB8 consultant the town had hired.
“That covers the program reductions,” concluded MacNab. “It’s a good mix of capital, administrative and project work. I suspect there are some things in there you are not excited to see, but we offered up close to what we targeted at the $2 million mark.”
Reserves, revenues and concessions
The next item was the use of reserve and stabilization funds. Luckily, the town has healthy balances in both accounts, and will be able to take approximately $15 million this year and potentially another $1 million next year from the reserve fund, without falling below 20% reserve. The town will take another $1 million from the stabilization fund.
“Based on proposals and recommendations, that leaves us at the end of fiscal year 2021 with a total reserves (general and stabilization) of just over $5 million, with the goal of bringing the stabilization fund up to $2 million and bring the reserve back up to a target of $5 million,” Peterson said, adding they expect it to take three to five years.
The last area covered was employee concessions. According to MacNab, the town needs to achieve approximately $1 million in employee concessions. However, “we want to let the council know we are not anticipating layoffs at this point and will do everything we can to try and avoid layoffs. But, we will need to work with labor representatives on the types of concessions we can implement to achieve this savings.”
Fluid future
Most of the questions from council were around the anticipated cuts, and tow items were asked to be held back from cuts if possible — the lobbyists and Blais and Associates, which helps the town secure grant funding. Blais has brought several hundred thousand dollars in funding to the town in 2020 already, and as the need for the federal government to help backfill funding for local agencies grows with the pandemic, the need for the town to have a voice working for them was deemed important.
The council also discussed, depending on the future, the possibility of adding a TOT onto VRBO properties in the town limits, revisiting the local sales tax which is the lowest in the county and hasn’t been altered since the town incorporated and brining service charges, like planning fees, up to an actual cost basis (currently, the town charges less than it actually costs to perform the services in order to help keep the cost of housing down).
While plans for moving forward with these cuts are now underway, Mayor Dominic Foppoli pointed out that the fluidity and uncertainty of the pandemic will mean all the issues will be revisited frequently.
“It’s such a moving target, it’s ridiculous to try to make policy for next 15 months. We’ll have to keep checking in as things evolve,” he said.
