City manager gives grim forecast for budget

Published 9:26 am Friday, May 15, 2020

The economic impact of COVID-19 locally is becoming clearer, as Danville City Manager David Milliron proposed a budget for fiscal year 2021 on Monday that proposed significant cuts.

In a letter to city commissioners, Milliron noted that “the speed and magnitude of the loss defies comparison.” Milliron wrote that the loss of jobs in a short amount of time is roughly double what the nation experienced during the Great Recession from 2007 to 2009 – which took the city of Danville’s budget five years to recover.

Kentucky cities, Milliron said, cannot levy income or sales tax, relying on revenues generated essentially from licenses and property.

“Occupational and business license taxes, insurance premium taxes and property taxes are usually the most important revenue sources for cities,” Milliron said.

With unemployment increasing sharply and businesses closing down while laying off or furloughing workers, reliable revenue sources needed to provide critical city services is “a host of unknowns.”

While Milliron proposed the initial budget on Monday, he did note that the budget will need to be a work in progress that will need to be revisited in the shifting landscape of this era of COVID-19.

In the proposed budget for fiscal year 2021, which will begin July 1, there is an expected 17.7 percent decrease in revenue from licenses and fees (a roughly $2.4 million difference) along with a 16.4 percent decrease in “other recurring revenue” which amounts to roughly $90,000.

The city is also looking at a 4.2 percent decrease in tax revenue, which amounts to approximately $84,400.

In total, the city is looking at a 14.7 percent decrease in resources for fiscal year 2021 from the estimated budget for fiscal year 2020, amounting to roughly $2.65 million.

“It’s very important that at some point, we recover and folks get back to work,” Milliron said. “You have limited revenue streams there.”

According to documents presented to the commission, the fiscal year 2020 budget of $9.29 million in revenue for occupational license fees was reduced to show an estimated year-end total of $8.595 million, a 7.5 percent decrease to compensate for the last two quarters of the current fiscal year budget impacted by COVID-19.

A steeper drop is expected for fiscal year 2021, which would lower that expected revenue amount to $6.25 million.

“This is a 32.7 percent drop over the current year budgeted revenues that will not be realized unless people return to work at pre-pandemic levels,” Milliron said.

The city is also looking at a nearly 30 percent decrease in revenue from the Business Net Profits Tax due to business closures.

Utility revenues are also significantly down, according to documents provided to the commission. As of the end of April, receivables for utility revenues are more than $400,000 higher than normal with the potential for that number to grow with people out of work and unable to pay their bills. There is also the potential for a $100,000 liability to water and sewer revenues, and city officials are anticipating an increase in sewer rates to cover costs.

In a letter from Milliron to the commission, he notes that 20 community agencies requested funding from the city totaling more than $275,000, which represents a 38.1 percent increase year-over-year.

All requested funds are held in abatement until the full impact of the COVID-19 pandemic is understood to city revenues,” the letter stated.

Speaking to the commission about the community agency funds, Milliron said that simply means those agencies are not being funded in the 2021 budget and the only way for the city to fund those agencies within the budget is to take those funds from the fund balance or find additional cuts within the budget.

Milliron said that while speaking with Danville Mayor Mike Perros, Perros informed him that the airport board could go a year without funding and the planning and zoning director would adjust his budget to sustain proposed cuts. The proposed budget cuts $25,000 from the planning and zoning budget. As of now, 100 percent of EDP funds are being held in abatement “pending a revised contract for services and overall state of the economy.” The EDP requested $100,000 in funding from the city for fiscal year 2021.

Organizations that requested funding from the city for fiscal year 2021 include Sunrise Children’s Services, Out of My Mind Meditation, Shepherd’s House, Heart of Danville, Grace Cafe, Boyle/Mercer Helping Hands, Centro Latino, West T Hill Theater, New Hope Food Pantry, Pioneer School of Drama, Bluegrass Community Action, Sister Cities, Citizens Concerned for Human Relations, Nursing Home Ombudsmen, the Brass Band Festival, Veterans Day Appreciation, Arts Commission, Senior Citizens Center, Family Services, and Child Development.

Request amounts ranged from $400 (CCHR) to $104,674 (Heart of Danville).

The city will also be transferring more than $630,000 from the general fund to parks and recreation in order to balance the budget. Beginning on Jan. 1 of this year, the city has worked with the county and the parks and recreation board to bring parks and recreation into the city budget as a city department.

The city will realize a transfer from the county for $322,000 to offset some of the cost.

“The angst here is we don’t know where these COVID-19 pandemic restrictions are going to go,” Milliron said. “There are almost daily conversations with the director of parks and recreation. For instance, we know the pool won’t open this season and even if it did, it needs substantial repairs. It’s been repaired every single year and there’s a significant water leak that needs to be addressed. The Fourth of July fireworks are probably going to be delayed. Most of these have been delayed until Labor Day because we don’t know when we’ll be able to have mass gatherings and outside events again.”

Anyone who wishes to view the budget documents and/or watch the virtual meeting can do so on the city’s website or at https://tinyurl.com/ybxrddjd