TUCSON, Ariz. -- Tucson City Council is set to take a look at the recommended budget for the upcoming fiscal year, but is eyeing a deficit due to COVID-19 due to the drop in sales tax.
City Manager Michael Ortega wrote in a memorandum to Mayor Regina Romero and council members that although the city was projecting a significant fund balance to end the fiscal year at the end of January, it could now be the opposite.
“Unfortunately, due to the virus, those projections are no longer accurate, and we are now facing a potential deficit for this current fiscal year (FY 19/20) and significant declines in most sales tax related revenues,” wrote Ortega.
Ortega said -- based off of information from University of Arizona economists -- the deficit could be more severe than the deficit Tucsonans saw in 2009. He added these projections are based off of limited information since the full impact of the virus has yet to be seen.
The drop in the economy could result in cuts to Tucson Police Department.
“The COVID-19 pandemic has resulted in unprecedented reductions in sales tax and state shared revenue for the City of Tucson. This loss in revenue will require significant expense reductions by the Tucson Police Department,” wrote Ortega.”
The plan in place details the two remaining classes of recruits will be consolidated for the rest of 2020. Ortega explained this would offer immediate financial relief and would give TPD more time to bring “quality candidates” on board.
“We are hopeful that as revenues begin to return to more normal levels in calendar year 2020 and financial projections improve, the police department will be able to hire recruits for those academies in small numbers, perhaps 15 students per class,” wrote Ortega.
He added more reductions could be made through furloughs go probationary sworn staff.
Cuts would also hit the Tucson Fire Department, by closing stations, according to the plan.
“The budget we are looking at right now isn’t really our reality right now because we are receiving CARES Act funds and we can fill these holes with some of these funds," explained Mayor Romero during the study session Tuesday afternoon.
The Capital improvement Program will also face cuts, according to Ortega's memorandum.
“We are exploring the impacts to the CIP as it relates to the Enterprise and Special Revenue Funds and attempting to keep construction projects on track to ensure we keep the construction industry moving through the next year,” wrote Ortega.
In the meantime, Ortega suggested ways to respond to the downfall of the Tucson economy by using one-time sources of revenue. He explained in the memorandum that it would buy the city time to react.
The General Fund, which funds public safety and other city departments has $66.2 million available to use during difficult times, according to Ortega. However, he is recommending council use no more than $53.5 million through June 30, 2021.
Some solutions on the table are:
- Interfund transfer/loan
- Certificate of participation refinancing
- Line of credit
- CARES Act reimbursement
City Council is looking at cutting 15 percent in expenses, which would equate to about one percent per month for each department.
“The following is an outline and plan for what we expect during FY 20/21, but this information should not be seen as the final answer to these expenditures since the final decisions surrounding expenditures will occur on a monthly basis as a function of actual revenues,” wrote Ortega.
However, the recent disbursement of funds to the City of Tucson was not accounted for in the proposed plan.
Mayor Regina Romero asked the city manager to update the plan to reflect the funds.
Council also set the foundation to add another $5.5 million dollars into a resiliency fund for struggling Tucsonans. The funds would target working families and small businesses.
This is on top of the established We Are One/Somos Uno resiliency fund that more than 40 applicants have already applied for. Some changes are set to be made to the lengthy application.