The City of Bellingham faces significant revenue shortfalls for 2020 as the result of actions taken to reduce the spread of COVID-19, according to an updated financial forecast presented to the Bellingham City Council on Monday, May 18, 2020.
The City's General Fund, which pays for general government services, relies heavily on the economic activity that has been curtailed to reduce the spread of COVID-19, Forrest Longman, Finance Department deputy director, said during his presentation to the City Council.
He said retail, hotels, restaurants and construction – sectors that have been heavily impacted by Governor Jay Inslee's “Stay Home, Stay Healthy" orders – account for more than 75% of the City's sales tax revenue.
The Finance Department's current forecast projects a $7.6 million – about 9% – shortfall in the General Fund.
Actions taken to date to address revenue reductions in the General Fund include:
- The City Council approved a budget amendment on May 18 removing more than $2 million of budget authority in the General Fund. This is budget authority that was not used in the first year of the biennial budget. This step impacts nearly every department but should not impede the City's overall ability to deliver services, Longman said.
- Bellingham Mayor Seth Fleetwood has instituted a hiring freeze on most vacant positions except those deemed essential at this time. This will freeze 25 currently unfilled positions. In combination with savings the City typically experiences from unfilled positions and staff turnover, we anticipate this will save an additional $3 million, Longman said.
The Finance Department also projects a $2.4 million combined sales tax revenue shortfall in the Street and Transportation Benefit District Funds. Longman said the loss of these revenues should not impact current services but will limit the City's ability to engage in future street and other transportation-related capital projects.
He said significant shortfalls also are expected in the City's Hotel-Motel Tax, which supports tourism activities, and Parking Services Fund which makes sure parking is available to businesses and customers in our downtown core. In both those areas, we expect about half the revenue that was anticipated.
Longman said the duration of the orders restricting business activities and other measures to prevent the spread of COVID-19 will directly impact the City's short-term and long-term financial picture.
“The Finance Department will continue to revise revenue projections as our response to this crisis progresses," Finance Director Andy Asbjornsen said. “We will respond as needed to ensure the City can continue to provide needed services while maintaining financial stability."
Bellingham Mayor Seth Fleetwood said City leaders are preparing now to reduce spending and plan for further revenue reductions.
“Given the severity of COVID-19-related impacts on revenues, we are preparing now to reduce spending and plan for shortfalls expected for the upcoming biennium," Fleetwood said. “Thankfully, careful financial stewardship in recent years has left us with strong financial reserves that will soften the impact of these shortfalls. Nonetheless, we are taking immediate actions to address revenue reductions and looking for ways to further reduce spending while maintaining City services."
“We can help our economy recover and our City revenue picture improve by helping our community get back on its financial feet," Fleetwood added. “Our priorities are helping reduce the spread of COVID-19, providing essential City services, and preparing for economic recovery. Our focus includes actions to aid businesses, get people back to work, and support human services, all steps that will contribute to a stronger economy and healthier City financial picture in the future."