City trimming budget for expected downturns

The city is implementing the first stage of budget cuts in anticipation of a decrease in sales tax revenue as the covid-19 threat slows businesses in the area.

Finance director Cary Elsten said this plan is based around an estimated 8 percent reduction in sales tax revenue — which comes in at $735,000 — projected by professionals in governmental finance, and will primarily impact tier 1 accounts, including maintenance, supplies, training, travel, fuel, uniforms and miscellaneous expenditures.

The proposed cut reduces the city’s proposed $18,963,414.00 budget to $18,428,381.28.

While the city won’t know the actual impact until it sees sales tax revenues for March in May — and will need to wait until July before that data establishes a pattern — these cuts can be implemented quickly, provide a very immediate benefit and can be reversed quickly if the city finds it has overestimated the impact, Elsten explained in an email to the city’s department heads.

The city’s top priority is maintaining current levels of service from the police, fire and streets departments and priorities for these cuts are to avoid employee furloughs, avoid operating at a budget deficit mid-year and avoid cashing in CDs to maintain a positive bank balance, she added.

“The City of Bella Vista is working very hard to keep up with the ever-changing projections for our economy. In an effort to maintain services, jobs, and fiscal stability, we will be adjusting our budgets as we update the expected with the actual scenarios we see taking place,” Elsten said.

It’s important to keep a strong reserve because that can help the city qualify for better options when shopping for a municipal bond to handle the trio of projects approved by voters earlier this year and the city may need to go into 2021 with a strong reserve if there’s a severe economic downturn, she said.

“This recession might last longer than eight to ten months, and could possibly evolve into a depression. We will need a healthy reserve going into 2021,” Elsten said.

If a revenue decrease occurs and is in line with projections, these cuts will be kept for the remainder of the year, she said.

If further cuts need to be made, the next tier will focus on capital projects and the third tier will affect employee retirement benefits, she said.

“If actual revenues don’t cover our ‘Tier 1’ budget, the Council will need to decide whether or not to go ahead and dip into reserves this year, or approve the ‘Tier 2’ cuts, which will eliminate our Capital Expenditures budget for 2020,” Elsten said.

While Elsten stated the exact numbers are somewhat flexible, the proposed cuts affect most departments.

The fire department saw the most significant cuts totaling $191,847.14 from its $5,812,997.00 budget. Just over half of that cut comes from operations expenses including training, travel, uniforms and fuel comprising a $111,676.86 cut. Building, equipment and grounds maintenance made up an additional $54,199.07 cut and another $25,971.22 was cut from supplies.

Police saw the second-highest cuts, totaling $94,648.95 from the department’s $4,492,994.00 budget. The cuts were along similar lines, with the bulk — at $67,723.59 — coming from operations expenditures.

Cuts to administration come in at $85,494.79 from its $787,917.00 budget, again with the lion’s share drawn from operations, particularly PR communications and travel.

The streets department is also looking at significant cuts totaling $75,036.98 out of its $3,638,722.00 budget, with cuts coming largely from operations and supplies.

Other cuts in the proposal include $8,427.58 from information technology, $2,636.68 from courts, $15,118.85 from the library, $6,402.33 from human resources and $55,419.44 from Community Development Services.

No cuts were made to the city’s legal department because there isn’t anything that can be cut, Elsten said.

Another concern going forward is the cost of health insurance, which could rise drastically in 2021, she said.

This is because insurance companies could expect the covid-19 pandemic to continue into next year and because many elective surgeries that were postponed this year could be carried out next year — though it’s too early to tell, she said.

“Right now, it’s really very speculative, but the City wants to be prepared,” she said.