City girds for major revenue hit from pandemic The Chandler Arizonan

City girds for major revenue hit from pandemic

City girds for major revenue hit  from pandemic
City News
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By Kevin Reagan
Arizonan Staff Writer

The City of Chandler’s proposed budget for the upcoming fiscal year makes a number of contingencies in case the COVID-19 pandemic wrecks the local economy but still adds millions of funding for infrastructure projects that officials say need to be done.

The city’s proposed budget of $901 million totals $27 million less than the current fiscal year and accounts for projected revenues losses expected to come as a result of the public health crisis that’s been ravaging the state since early March.

Dawn Lang, the city’s management services director, said several spending requests submitted by the city’s departments had to be removed from the proposed budget because of the uncertainty surrounding the pandemic’s impact on Chandler’s finances.

“We pulled out a lot of those new requests and tried to keep the budget as even as possible,” she said.

Requests for new pool equipment, extra Christmas lights and a tourism coordinator position are some of items going unfunded in the fiscal year beginning July 1, according to budget documents.

The city is not intending to eliminate any existing positions and has proposed adding two jobs – a new school-resource officer that will be offset by grant money and a police commander position that had been previously funded through temporary funds. 

In comparison, Chandler last year added five new positions in the current spending plan.

Because the current state of affairs is so unprecedented, the city opted to adopt a “phased” approach to its budgeting process.

Revenues will be continuously monitored by staff and council will be consulted to discuss any adjustments that need to be throughout the year.

If revenue losses turn out to be even worse than the city’s projections, Lang said, then some expenditures can be strategically removed or delayed.

But there’s still a big question surrounding how long the city would have to continuously reduce its spending, Lang added.

“That’s what we don’t know right now,” she said.

The proposed budget breaks down to $387 million for department operations, $151 million for new capital projects, $194 million for capital carryforward, $60 million for debt service, $7 million for technology replacement and $102 million held in reserves.

The budget’s expenditures for new capital spending is notably $40 million more than the current fiscal year. The total operating budget is 6 percent lower than the current spending plan.

City Manager Marsha Reed said a greater emphasis on improving Chandler’s aging utilities in the coming year accounts for the expanded capital spending.

“As we look to strive to improve the quality of life for our citizens,” Reed said during a budget meeting April 24. “It is vital that we continue to provide well-designed and maintained infrastructure and amenities.”

Among the 35 capital projects the city plans to bankroll through its general fund, nearly half have been flagged as expenditures that could be delayed by six months if the economy suddenly takes a bigger nose dive in the next fiscal year.

Some of these “Group B” projects include $500,000 on landscaping upgrades, $300,000 on sign replacements, $285,000 for improvements to the Center for the Arts, $800,000 for rebuilding one of the city’s fire stations and $2.1 million for creating a veteran’s memorial.

Reed said the Group B projects have the same level of necessity as the budget’s other proposed projects but that it’s only a matter of what could be pushed off until later in the year if revenue continues to decline.

“They’re all important projects, she said, “but they are projects that we could hold if the funding does not come in.”

The projects categorized as “Group A” are mostly renovations and repairs to the city’s existing buildings.

Some infrastructure projects have had to be modified in recent weeks to help mitigate the financial impacts felt by COVID-19.

The Public Works and Utilities Department has proposed spending $500,000 – half of what was originally requested before the pandemic hit – on paving and maintaining the city’s streets.

John Knudson, the department’s director, said it’s crucial for the city to proceed with this scheduled maintenance or else the lifespan of Chandler’s roads will shorten.

“If we get behind,” he said, “we’ll never catch up.”

Chandler has always prioritized road maintenance over the years, Knudson said, and it’s why he believes the city’s streets have a better quality than its neighbors.

“I wouldn’t want Mesa’s roads,” he added.

A good chunk of Public Works services are funded by Chandler residents paying monthly utility fees. They go into an enterprise fund that’s projected to take a $5-million hit.

The city is not planning to raise water or trash fees in the upcoming year but those may start to climb in fiscal year 2022.

One of the city’s most vulnerable revenue sources are all the retail transactions that have not taken place for weeks. Bars, theatres and shops have been closed, preventing residents from spending money that would have generated sales tax revenue.    

Local sales taxes account for 51 percent of the city’s general fund and have been predicted to shrink by $15 million due to anticipated disruptions caused by COVID-19.   

Chandler’s hotel industry reportedly had 35,500 fewer rooms booked in March than the previous year, according to the city.

Though the loss of economic activity is expected to cost the city millions in revenue, Economic Development Director Micah Miranda thinks Chandler’s industry sectors are still diverse enough to help the city weather through the pandemic’s repercussions.

Many of the city’s biggest employers are still seeing a demand for services and haven’t been hurt as much by the pandemic.

“We don’t have all our eggs in one basket and this is really where Chandler’s economic climate is going to serve us well during this particular instance,” Miranda said.

Some city leaders are nervous Chandler’s proposed budget may not be conservative enough to handle the devastation that may come in the next year.

Councilman Terry Roe said he thought some of the budget’s projections were too optimistic and don’t account for the pandemic’s full impact.

“This is a little rosier than I believe it will be,” Roe said during a budget meeting. 

Councilman Jeremy McClymonds said he thinks the proposed budget needs some flexibility in order to adapt to whatever changes or volatility may occur in the coming months.

“What I’m hopeful for is that we can toe the line between the worst and the best,” McClymonds said. “So, if we do get the best, we don’t kneecap our city.”

The council is scheduled to tentatively adopt the proposed budget on May 28.

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