Things are not as bleak as initially predicted for the Town of Leesburg coffers, but Town Council members and the staff are bracing for future revenue impacts in fiscal year 2021.
Management and Budget Officer Jason Cournoyer on Monday night told the council that the revenue shortfall for fiscal year 2020 was slightly smaller than earlier staff projections.
During his last presentation to the council in May, he told the council that staff was estimating a $3.3 million shortfall for the fiscal year that ended June 30. In fact, that number was not quite as high, instead coming in at $3.15 million. Projected revenue improved by about $150,000 because of higher than expected sales and use tax revenues for the months of April and May. The staff is watching those numbers closely, he said, and hoping for good news when consumer tax revenue, which is paid quarterly, comes in. Major sources of consumer tax revenue to the town come in the form of meals tax and Transient Occupancy Tax, which is a tax paid by lodging establishments. Those taxes are due to the town Aug. 20, but penalties on late payments have been waived through Oct. 20. Any taxes paid after Aug. 30 will be considered Fiscal Year 2021 revenue, Cournoyer said.
Both Cournoyer and Town Manager Kaj Dentler pointed out the almost $5 million in cuts to General Fund expenditures that were made in April, just after the onset of the COVID-19 pandemic, to protect against larger budgetary impacts. The $4.9 million in General Fund reductions are now expected to exceed fiscal year 2020 revenue shortfalls, and the excess $1.1 million balance will be used to protect against revenue shortfalls in the current, 2021 fiscal year.
First quarter Fiscal Year 2021 revenue projections have improved with the reopening of the Ida Lee Park Recreation Center and the accompanying A.V. Symington Aquatic Center. The staff is still projecting a deficit, but with those facilities open the expected revenue shortfall decreased by $650,000, to a now estimated shortfall of $7.23 million. Paid parking operations are expected to resume in the downtown area Sept. 8, which will also add to town revenues. Free parking has been in place in the Town Hall parking garage and Loudoun Street lot since the Town Council declared a state of local emergency in March.
As the staff is projecting out revenue shortfalls on a quarterly basis through Fiscal Year 2021, the picture improves each quarter.
“As consumer activity increases and confidence increases and the pandemic lessens we get closer to normal,” Cournoyer said of the projections.
For Fiscal Year 2021, reductions in General Fund expenditures will continue, including continuing to hold 16 staff positions vacant; delaying hiring of other vacancies; freezing staff travel and training; suspending employee merit increases and the town’s annual contribution to Visit Loudoun until later in the fiscal year; and managing a 10-percent decrease in town departments’ operating costs. The town has also realized some savings with the cancellation of some of its annual events, including its July 4 festivities and August’s TASTE Leesburg.
Dentler pointed out that some of those departmental cuts will need to be budgeted for at some point. As an example, he noted that the town has halted its vehicle maintenance program, to the tune of $1.5 million in savings, but that work will need to be done. Also, some of those departmental budget cuts could have a service impact to town residents if they need to be relied on later in the fiscal year.
In a bit of good news, an unexpected increase in the town’s liability insurance renewal was offset by savings in employee healthcare insurance because an increase in employees opting out of coverage.
In the Utility Fund, usage remains flat compared to pre-COVID times, and revenues are expected to meet or exceed expectations. Revenue shortfalls are not expected to create funding issues or delays in projects planned in the town’s Capital Improvements Program.
In light of the challenging fiscal times, several council members questioned the wisdom of continuing the town’s fiscal policy of maintaining a General Fund unassigned fund balance equal to no less than 20 percent of General Fund expenditures, as part of the town’s Long Term Sustainability Plan. Staff members and outside financial consultants have credited that policy with helping Leesburg to achieve a AAA credit rating. Previously, the town set that level at 15 percent of General Fund expenditures.
“At some point this becomes an anchor rather than an opportunity to keep a good AAA credit rating,” said Councilman Ron Campbell.
Mayor Kelly Burk, however, pointed out the significant savings on interest rates the town receives due to the credit rating, saving the town millions of dollars on capital projects, for example.
More information on that is expected at the next fiscal update in October when David Rose, the town’s financial advisor, is expected to present. Dentler said that rating agencies would expect the town to have a plan to bring the fund back up to the 20 percent level should the council opted to reduce it temporarily.
“It may sound good to reduce it, but we’ve got to have a plan to bring it back up [to the 20 percent level] and that could require you to raise taxes or lose your rating. Whatever short term decision we make, we do what we gotta do. But we’ve got to understand the ramifications of that long term as well,” he said.