Coronavirus’ latest victim: Fort Worth’s budget. Some city projects may be delayed
When sales tax projections from March come in later this month, Fort Worth officials will have hard data to back up the educated guess they’ve taken this week — the city’s budget will take a hit.
Fort Worth is likely to be out nearly $70 million in sales tax and other revenue related to the novel coronavirus economic down turn. That’s based on early assessments from the city manager’s office that show a roughly 15% immediate drop in sales tax revenue and a nearly 40% plummet in hotel tax and tourism-related revenue. Sales tax revenue is likely to continue to fall through the rest of the year.
“It’s going to hurt,” City Manager David Cooke said Tuesday.
In the short term, the city may take one debt, freeze hiring and delay projects, like a community center planned for northwest Fort Worth. If the downturn continues, Cooke said tough choices will have to be made, though specifics weren’t available Tuesday.
Fort Worth first ordered bars and restaurants to shift to takeout and delivery March 17 and then shuttered all non-essential business, including retail, on March 21. Retail and food service make up about 45% of the city’s sales tax revenue. Fort Worth Mayor Betsy Price has said the residents should stay home through April 30.
Firm numbers aren’t yet available, but Cooke said he expected businesses closures to rapidly cut into the city’s sales tax revenue, which makes up more 20% of the general fund budget and all of the Crime Control Prevention District budget, which generates revenue for the police department.
While the first six months of sales tax revenue was on track, Cooke is now projecting sales tax may be down a total of 30% for the rest of the year. Preliminary projections show the general fund will take a $32 million hit between sales tax and fines and other revenues. The police budget will lose $12 million.
The $68 million public events budget, funded largely though hotel sales tax and fees related to the Will Rogers Memorial Center and other city-owned event space, is expected to take a roughly $25 million hit, Deputy City Manager Jay Chapa said.
Cooke and Chapa Monday evening outlined for the Star-Telegram a short-term scenario where the city slows cash spending and delays some city projects to blunt the impact of the revenue plummet.
The first move, Cooke said, is that the city will prioritize projects based on need and added costs.
For instance, the council Tuesday approved $900,0000 for design work of a planned community center in Northwest Community Park off Blue Mound Road in far north Fort Worth. Cooke said after the design is finished, the city may delay moving forward with the actual construction if his office isn’t comfortable with budget projections.
In recent years, the city shifted some expenses to cash rather than borrowing money. The change improved the city’s finances and has allowed some projects to advance quicker than they would have. That model may have to be slowed, Cooke said. The city has about $50 million budgeted for cash-funded projects.
Some of those projects maybe paid through debt, if interest rates remain low, Cooke said. That includes some crime-prevention projects typical paid through through the police sales tax. The city also anticipates refinancing bonds at a lower interest rate.
“We want to protect the cash we have,” he said.
Cooke said he will freeze the hiring on roughly 300 open positions. That move will save nearly $7 million, he projects, but will also help prevent the city from having to furlough or layoff employees. So far the city has not had to cut employees, though some who aren’t working are taking emergency leave the federal government approved in the $2 trillion stimulus package.
The Star-Telegram reported last week Fort Worth was eligible for $125 million to $200 million in federal aide from the $2 trillion stimulus package. Estimates Cooke showed the council Tuesday indicated $166 million would come to the city, but it’s unclear when or how the federal government will allocate the money.
Cary Moon was the only the only City Council member to speak specifically on the revenue projections during Tuesday’s meeting, saying Fort Worth taxpayers should not be expected to make up for the reduction. Moon called the projections a “best case scenario” adding that he expected conditions to worsen.
City projects will not grind to halt, Cooke said.
Construction projects that likely won’t increase the city’s annual expenses, such as renovations to existing space and necessary infrastructure repairs, will continue. Cooke said pumping city money into construction will infuse the local economy with needed cash. Fort Worth spends about $100 million a year on construction projects.
Transportation projects outlined in the 2020 budget and in previous bond proposals will move forward “full speed” Cooke said, noting that Fort Worth has been behind the curve on transit compared to similar cities.
Cooke doesn’t expect an impact to property tax revenue, the city’s largest source of income, this year. Though some projection is he outlined for the council Tuesday showed the potential for a decrease in property tax revenue next year.
Sales tax revenue reached a record high in growth in fiscal year 2019, according to the city’s budget, and was expected to grow by more than 5% through 2020. The city’s 2020 budget document noted the robust economic growth of the Dallas-Fort Worth area, which as been one of the fastest growing regions of the country for many years.
That may change after the coronavirus outbreak ends.
“You know, if we rebound this summer, then we might be back on our old schedule, but if this thing gets protracted then I think we’re into evaluating when the 2022 bond program comes as well as when we complete other projects,” Cooke said.
