City budget attempts to forecast an unclear future

City staff’s initial budget proposal for fiscal year 2020-21 includes a $26.1 million reduction in total revenues and a $30.3 million cut in expenditures over the previous year, although those figures remain subject to change.

Later this month, the City Commission will discuss next year’s budget in a pair of workshops, giving feedback on the financial plan staff has developed. In addition to feedback from elected officials, there’s another factor that could reshape the 2021 budget: shifting economic conditions associated with COVID-19.

“It’s really hard to project where we’re going to be when you have six good months and six months of unknown,” Finance Director Kelly Strickland said.

The city delayed its traditional budget cycle to gather as much information as possible before finalizing a proposal. The budget includes $210.2 million in projected revenues and $225.8 million in planned expenditures next year, with other available funds used to cover the gap. General fund revenues and expenditures are projected to total $67.8 million, a $130,639 decrease over the previous fiscal year after accounting for a proposed transfer of $7.2 million to the parks and recreation district.

The city is proposing a general fund millage rate that is functionally the same as the previous year, though the money would be accounted for differently. Rather than maintain a general fund millage rate of 3.2632, the city would lower that property tax rate to 2.5963 for the general fund, reclassifying the remaining .6669 millage as a tax to fund operations of the parks and recreation district. The city currently funds parks operations with general fund revenue.

One mill is equal to $1 in tax for every $1,000 of taxable value on a property. For a property with a taxable value of $200,000, the proposed general fund and parks district millage rates would result in $652.64 in city taxes.

Financial forecast

Before the city could attempt to forecast what 2021 will look like, it first had to make plans for the remainder of 2020, Finance Director Kelly Strickland said.

In April, the city announced a series of cuts to address a projected $4.3 million shortfall across six different funds. The cost-saving measures included delaying capital purchases, instituting a hiring freeze, eliminating part-time hours and restricting nonessential travel. Strickland said the proposed budget would carry some of those practices over to the next fiscal year, including a hiring freeze for all vacant positions.

Although even a slight reduction in general fund revenue is a departure from what the city expected before the pandemic, some elected officials have said they want to be sure to prepare for the worst as they get ready to adopt a budget.

“It’s going to be bad,” Commissioner Hagen Brody said at a July 6 meeting. “It’s going to be, I think, worse than many of us have expected.”

Strickland said she believed her revenue forecasts were conservative, projecting a $1.2 million decrease in sales tax revenues that will affect both the general fund and the city’s capital improvement program. City Manager Tom Barwin previously said some factors are working to insulate the city from the immediate effects of an economic downturn, such as ad valorem property values already being finalized.

As staff debated how best to balance the budget, they sought to avoid cuts to existing full-time positions. Of the city’s general fund expenditures, 78% is budgeted for personnel expenses. Sixty-one percent of the general fund budget is allocated toward public safety, including $36.9 million for the Sarasota Police Department.

After the July workshops, the City Commission will set a preliminary millage rate before adopting a final budget at a pair of meetings in September. In between, the city is preparing to hold a meeting in August in case there are any developments that change the financial outlook. Strickland said the city was able to incorporate information from after the statewide shutdown into its budget projections for 2021, so she’s optimistic the proposal will remain in line with reality into the next fiscal year.

Still, given the lack of precedent for a response to a pandemic-related downturn, there’s no guarantee those projections will hold up into the next month.

“I don’t foresee that we will make any major changes in August, but there’s a possibility of that,” Strickland said.