Across the country, local governments are cutting budgets as the financial impact on businesses and organizations drastically affected by the coronavirus pandemic comes into view — often in red ink.
That’s true here and everywhere. What was unthinkable three months ago is now in front of us. Chattanooga’s tourism is down, and our many businesses that cater to it are slowly trying to come back to life while much of the public remains skittish of returning to eateries, venues and events. Even Chattanooga’s extremely popular Nightfall series is opening this year with “virtual” performances, as social distancing remains the buzzword of the day.
But Chattanooga, thanks to past years and careful budgeting, is in better shape than most cities to weather this COVID-19 downturn. Mayor Andy Berke’s proposed 2021 budget calls for no new taxes, fees or layoffs. It does, however, include just over $8 million in cuts through hiring and pay freezes.
Likewise, it calls for “essentially no improvement work,” aside from an $8.4 road improvement budget, and fewer social initiatives than the administration had hoped to incorporate in 2021.
In New York City, leaders in April announced $1.3 billion — billion with a B — in emergency cuts, along with a hiring freeze and “vacancy reductions.” And that was before Mayor Bill de Blasio starting talking later in the month about the 2021 budget, which calls for $8 billion in cuts.
Here, Berke says his proposed $255 million budget is possible because of the city’s significant reserve fund and conservative budgeting of a 1% operating increase this fiscal year.
“Our city is in an extremely strong financial position. Back in 2008 as the recession was hitting, we had roughly $40 million in our reserves. As we began this budget year, we had $72 million in reserves.”
This is a good thing, considering Chattanooga suffered the double whammy of both COVID-19 and an EF3 tornado ripping through the city — to the tune of about $11 million in additional services costs.
Add to that the uncertainty of federal funding —for both the coronavirus virus and the tornado rescue and cleanup work. Past tornadoes in the region have left cities and counties waiting as long as five years to receive pledged FEMA funds, for example. And in the first round of direct municipal funding for COVID-19 relief provided by the CARES Act, only cities with populations above 500,000 could rely on receiving funds. Chattanooga isn’t that large.
Berke’s proposed hiring freeze will mean that 221 vacancies of the city’s roughly 2,900 authorized full-time positions will remain vacant — a $5 million savings. But the city — which has a heart — will absorb the roughly $3 million in additional pension and insurance costs so that no city employee is at a “net negative” for compensation next year.
“Our finances have been challenged and will be challenged,” Berke told The Chattanooga Times Free Press earlier this week, pointing to a projected $8.4 million revenue loss from local option sales tax, hotel-motel taxes and other funding. “But at the same time, our demand for our services is increasing.”
Still, Berke said he and other city officials understand that the city’s residents are challenged now, too.
“One of the things we work really hard to do is not have any increases in fees,” the mayor said. “People are hurting badly. I know you’ve seen other places where substantial tax increases have been proposed. We have chosen not to do that.”
You may recall that Berke and the City Council in late March provided $2.5 million to aid small business as the COVID-19 closings began. The money was sorely needed and didn’t last long: More than 700 businesses reached out for help, he said.
Berke’s has been a city administration that has — like the rest of Chattanooga residents — exhibited a big heart for giving yet a strong head for saving.
We’re all clearly the better for it now.
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