A plan for recovery

Yuma city administrator presents council with budget for 2020-2021

Before the COVID-19 pandemic, Yuma was expecting a budget surplus. Now it’s facing a shortfall, forcing staff to reset and reevaluate expenditures, City Administrator Phil Rodriguez told the City Council on Wednesday.

However, Rodriguez said he is optimistic that the city will “recover and rebound much quicker than other communities” due to the city’s finances before the crisis, he said.

He presented a report of the current finances and a $249.2 million proposed budget for fiscal year 2020-2021, as well as the plan for recovery of the city’s finances during and following the pandemic.

The mid-March closure of many businesses will translate to reduced tax revenues for the city, but those numbers will not come in until the end of this month. For now, to meet legal deadlines, staff put together a proposed budget mostly based on predictions of how the local economy will bounce back.

Rodriguez told the council that by early March, city staff had the budget about 75% complete, then had to do a complete shift when the effects of the pandemic hit Yuma.

“There is no good playbook for this right now,” Rodriguez said, noting that a recovery might mean going back to the most basic level of services, keeping

them effective and efficient with limited resources.

To predict lost revenue, staff looked at the unemployment figures for jobs listed in Yuma and the surrounding areas, acknowledging that many folks who don’t live in the city limits shop and spend money in Yuma. Staff forecasted a decline in spending of $11.2 million across all funds, excluding grants. Rodriguez explained that the proposed plan focuses on spending, not revenue, because spending can be controlled and it’s easier to expand a budget later than constraining it.

Currently, the proposed budget for 2020-2021 is balanced due to internal cuts, hiring freezes, efficiencies, inducements for retirees and other emergency costsaving measures first put in place in the middle of March.

The proposed budget includes some increases, for example, at $51.4 million, the Capital Improvement Program is actually more than last year, but the city expects 45% of the costs to be recovered through grants, reimbursements and private-public partnerships. In addition, the public safety budgets, which include police and fire services, have measurable increases in expenditures. The Police Department will add 12 positions to the patrol and investigative divisions, and the Fire Department will take on the pay related to nine positions that were initially funded by an expiring grant.

Rodriguez said that the city is not losing employees but rather adding them “in a very responsible way.” Although this means significant new spending, it “underscores the city’s continued commitment to prioritizing our public safety agencies and the men and women who serve honorably in these roles,” the administrator said.

Staff also prioritized street preservation projects in view of the council’s wish and the “tremendous amount of pressure” on the city by residents. The streets budget includes 101% more funding than last year.

As for the raises promised by the council early this year, which were to take effect July 1, Rodriguez proposed delaying their implementation for five to six months. He also called for forming a frontline focus group made up of employees from every department who will track the city’s finances every month and serve as advisors to the administrator and Finance Department.

“Introducing this process will strike a balance between fiscal responsibility and the need to ensure that our employees’ pay is brought up to market as previously supported by City Council,” Rodriguez said.

Another challenge faced by the city is a health insurance premium increase of 13.1% effective July 1. The city will absorb 100% of the increase on the Plan B and high deductible plan and 85% of the increase for those on Plan A.

Rodriguez proposed a target fund reserve of 18% of the general fund “only to be used if we find ourselves in dire straits,” he said.

In addition, he called for reserving 2% of the general fund as a budget stabilization fund that could be used “quickly if for some reason we see a really rough month,” such as a drastic dip in sales tax revenues, “to help me make sure we don’t have a month when we’re unable to deliver services or meet our obligations.”

Lastly, Rodriguez noted,

“to not further exacerbate the local economy,” all water, wastewater and property tax rates will remain unchanged. For the property tax, the city will seek an expansion of the existing tax levy for FY 2021 only attributable to new construction, while maintaining the current rate of $2.3185.

“As such, this plan to forego a property tax rate increase further necessitates the decreased spending as reflected in the proposed budget,” he added.

The council will hold a roundtable discussion on the CIP budget at 5:30 p.m. Tuesday, May 12, and on the operating budget at 5:30 p.m. Thursday, May 14.

Rodriguez advised the council members that they keep the budget the same and pointed out that “there’s very little margin” for changes. The council might want to be more conservative, but if they want to expand certain items, they will have to prioritize and decide what to take out.

The administrator asked for “continued flexibility” in the event revenues don’t come in as predicted. “I hope everyone certainly understands this is an environment where there is more unknown than known,” Rodriguez said.