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Expecting revenue shortfall of $10M or more, city of Spokane eyes budget cuts

Spokane Mayor Nadine Woodward answers questions about city's response to the emerging COVID-19 crisis during a press conference on March 11, 2020, at Spokane City Hall. City leaders are starting to make budget cuts as a result of expected revenue shortfalls. (Colin Mulvany / The Spokesman-Review)
Spokane Mayor Nadine Woodward answers questions about city's response to the emerging COVID-19 crisis during a press conference on March 11, 2020, at Spokane City Hall. City leaders are starting to make budget cuts as a result of expected revenue shortfalls. (Colin Mulvany / The Spokesman-Review)

Knowing it will not be insulated from the downturn that has roiled the national and local economies, the city of Spokane is exploring ways to tighten its belt.

The city already has implemented a hiring freeze on nonessential positions. But officials expect to make deeper cuts in anticipation of a sharp drop in revenues.

Most businesses, including many retailers, were forced to shutter as part of Gov. Jay Inslee’s “Stay Home, Stay Healthy” order in March. That hits the bottom line of the city, which expected to collect about $51 million in sales tax revenue to balance its $1.1 billion budget.

The city anticipates falling short of its projected sales tax revenue by about $10.8 million in 2020, and $2.1 million in other revenues.

But as the response to the COVID-19 pandemic continues to evolve, estimating revenues is like shooting at a moving target, officials stressed this week.

Many of the costs the city is incurring directly related to its COVID-19 response are expected to be reimbursed through either congressional aid like the Coronavirus Aid, Relief, and Economic Security (CARES) Act, or the Federal Emergency Management Agency. But like other municipalities, the city still is awaiting clarity on what expenditures will qualify, said city spokesman Brian Coddington.

As of the most recently compiled figures – which are now more than a week old – the city tracked about $23 million in spending related to the COVID-19 response.

As an exercise, city Chief Financial Officer Tonya Wallace said the city will ask departments to plan as if there is an across-the-board spending cut. But in practice, “not every line of business is the same, and there will be some of our businesses that have a much higher demand for service,” Wallace told the Spokane City Council’s Finance Committee this week.

“There will be more of a surgical process,” Wallace said.

The most reasonable plans will be brought to the City Council for consideration, she said.

Asked by Councilwoman Lori Kinnear if personnel cuts were off the table, Wallace said “We’re asking for any and all ideas,” anticipating the economic impact will last into 2021. Some facets of city government may be forced to restructure.

“We’re going to be operating very differently after we’re through this … we’ll be looking at personnel, but also looking at supplies and services that they could cut back, even temporarily,” Wallace said.

The city’s reserves are expected to take a hit, but how deeply officials dip into them remains to be seen.

Spokane started the year with $47.5 million in total reserves, but by year’s end that could fall to $32.3 million – although Budget Director Paul Ingiosi noted that figure is assuming the city makes no further cuts to its expenditures.

One potential cost savings the city has identified is refinancing bonds to take advantage of lower interest rates, which could save more than $5 million annually.

The city has begun the work of auditing its COVID-19-related expenses, Wallace said. It plans to issue a guidebook to departments so they know what is eligible, and what is not, for reimbursement as they incur costs related to COVID-19.

City staff are working on a special budget request to present to the City Council for approval to purchase personal protective equipment and cover other costs incurred due to the COVID-19 response. They believe the costs will be reimbursed, but “in the interim, departments really need the authority to spend dollars,” Wallace said.

On Tuesday, Councilman Michael Cathcart sent a letter to Mayor Nadine Woodward endorsing budget cutbacks, but advocated that law enforcement be exempt.

“Keeping our community safe should be a top priority, even as we address the healthcare crisis, the economic shutdown, and the fallout from both that is still to come,” Cathcart wrote.

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