City enters FY 21 in ‘manageable’ fiscal position

Albuquerque used CARES Act money to cover 2020 payroll costs

Despite a monthslong economic slowdown that has battered revenue expectations, Albuquerque’s top finance official says the city is starting the 2021 fiscal year in a “manageable” financial situation thanks largely to federal relief money.

While officials anticipate continued losses in the next 12 months — even an “optimistic” estimate is $55 million — the city has so far been able to maintain services and avoid layoffs.

In fact, the municipal government carried an estimated $40 million cushion into the fiscal year that began last week.

“We just don’t know how it will pan out in ’21,” Albuquerque Chief Financial Officer Sanjay Bhakta said last week. “But it looks like it could be manageable.”

Though the city has not yet had to take any drastic measures,

COVID-19 has wreaked some havoc on the city budget since it emerged in New Mexico in March.

Bhakta said he expects that when fiscal year 2020 accounting is finally completed, it will reflect the city’s revenue fell $27 million short of budget.

The city absorbed some of that by spending less. Restricting hiring and employee travel, along with other cuts, saved about $15.5 million, Bhakta said.

But the federal assistance made the biggest difference. By using it to cover some major expenses, the city reduced the strain on its tax-supported general fund.

The city is charging almost $43 million worth of 2020 payroll costs to its $150 million pot of federal CARES Act relief money. It is also using about $8 million in relief money from the Federal Transit Administration.

Though the CARES funding has many restrictions — and any money not used by year’s end is scheduled to revert to the federal government — the city has worked with a consultant to get the most out of it while still complying with the guidelines, Bhakta said.

“We were able to use (the federal funds) in a very innovative and clever way to help us with the FY 20 shortfall ... and help us better prepare for what’s coming in FY 21,” Bhakta said. “I think, unlike some other cities, we feel good that we were able to prevent furloughs, pay cuts, layoffs and, above all, we’re able to continue the programs and not compromise any services.

“I think we believe that’s quite an achievement in times like this to innovatively use all the resources available to us.”

Though the city has taken a hefty revenue hit, the tax picture is actually not as dark as officials projected early in the pandemic.

The city’s share of gross receipts tax — a tax assessed on the sale of most goods and services — only dropped about 14% in April compared to April 2019, according to state figures.

That’s despite the stay-at-home order related to the pandemic and sweeping business closures.

Albuquerque will not get its May GRT until later this month, but Albuquerque City Councilor Diane Gibson said the GRT data available so far has come as something of a pleasant surprise.

“When I first saw the April GRT report, I thought, ‘Well, for bad news, this is pretty good,’ ” Gibson said.

The April GRT numbers show some business sectors actually performed well, though many took a massive hit.

Construction — one of the city’s key tax-producing industries — increased 18% in April compared with a year ago. Accommodation and food services, which includes restaurants, fell 46%.

Overall retail trade dropped 20% from April 2019, but grocery food sales brought in 91% more revenue for the city.

City economist Christine Boerner attributed that to pandemic-related stockpiling.

While overall GRT did not plummet as much as initially projected, Boerner said the city has sustained steeper-than-projected losses in other areas. That includes revenue from city departments and venues.

The city estimates that the ABQ BioPark zoo — which remains closed — lost about $673,000 in April and May admission compared with a year ago, while swimming pool revenue fell an estimated $221,000 during the same span.

Early in the pandemic “we were really in the dark about how we were going to be impacted,” Boerner said. “We knew there would be a hit in GRT, (but) at the same time, we didn’t have very much information about our (city) department revenues.”

The uncertainty caused by the pandemic has delayed the city’s normal budget process. The city is not expected to finalize its fiscal year 2021 budget until October and is for now still operating within its 2020 budget structure.

There are, however, some estimates that Albuquerque’s 2021 revenue will fall anywhere from $55 million to $107 million short of previous forecasts, with the baseline estimate at $68 million below expectations. Bhakta said the $40 million cushion should help bridge the divide.

Councilor Gibson said there are a few pieces of federal legislation that could further assist the city government and citizens, but what really matters is mitigating the spread of COVID-19.

“2021 could be another really tough year; we just don’t know,” she said. “I’m keeping my fingers crossed. (But) it’s directly related to public health.”