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City leaders brace for COVID-19 impact on Spokane budget

Inland Asphalt crews work on Sprague Avenue at Monroe Street, Nov. 9, 2016, as road construction continues in downtown Spokane. Spokane city leaders are hoping to move construction projects forward despite concerns that the city budget will fall as a result of the COVID-19 pandemic. (Dan Pelle / The Spokesman-Review)

To help plan for the economic impact of a shuttered economy, city of Spokane officials looked back to the crash of 2008 for lessons.

At least initially, the financial consequences of the novel coronavirus appear to be dwarfing those of that downturn, with nearly 3.3 million people filing for unemployment benefits nationwide last week alone – several times the number who did at the onset of the Great Recession just more than a decade ago.

Still, city leaders remain optimistic federal and state aid will help pay for the local COVID-19 response. They also say they have built reserves during the good times to help weather hard times and are hopeful the current economic woes are short-lived.

But they are only now beginning to forecast what could be a turbulent next several months, or even years.

“This is really unprecedented. Fortunately we do have strong reserves available,” said Spokane City Councilwoman Candace Mumm, who leads the council’s Finance and Administration Committee.

The city already has an ordinance, passed after the last economic downturn, that requires any unspent funds to be placed into reserves at the end of the year. It’s working on another that would save unspent money on a quarterly basis.

“We’ve been building that up over the last several years,” Mumm said. “We’re not to our goal yet, but we have been putting money away.”

Mumm already has met with Chief Financial Officer Tonya Wallace and discussed adjusting the city’s anticipations for tax revenue, and city staff are expected to present an economic outlook to the finance committee at its meeting next month.

Gov. Jay Inslee issued a “Stay Home, Stay Healthy” order on March 23, limiting travel to basic necessities like the grocery store or pharmacy. Businesses deemed nonessential were ordered to close.

The order expires April 6, but Inslee has warned it could be extended if necessary to stop the spread of the coronavirus.

As the economy grinds to a halt, so do the city’s sources of revenue.

Mumm’s initial estimates are a 3 to 8% drop in tax revenue, but nothing is definitive. With businesses closed, the city could bring in less utility tax revenue from commercial ratepayers. With fewer people shopping, it also can expect a drop in sales tax revenue.

“We could have a very dramatic swing coming,” Mumm said.

The City Council recently hired a budget officer of its own, tapping former city finance director Tim Dunivant to analyze city finances part time on its behalf.

“We’re having him go through the budget with his experienced and knowledgeable budget eye and look for opportunities,” said City Council President Breean Beggs.

Dunivant has been tasked with crafting an ordinance that would sweep unspent city funds, every quarter, into reserve accounts. For the first quarter of 2020, that would amount to about $400,000, Beggs said.

Beggs said he expects the economic impact of the coronavirus on the city to be “substantial, but there’s not a lot I can do about it at the moment.” His primary goal, he said, is to preserve as much of the economy as possible to allow for a quicker rebound when restrictions are lifted.

The city doesn’t have much in the way of discretionary funding to provide assistance to struggling businesses and residents. Still, he suggested the city look to fill gaps left by the assistance programs implemented by the state and federal governments.

The city already has set up a tracking system to document its work related to the COVID-19 response with hope it will be reimbursed by the federal government.

As for capital projects, city spokesman Brian Coddington said anything timely or needed right now is being scrutinized, but the city plans to move ahead with its construction season as planned and could accelerate some projects.

With projects already budgeted, the work could be a boon to local contractors and their employees, who are looking to the city for business as construction in the private sector could dry up.

“We’d want to be able to keep as many people at work as possible,” Coddington said.

And with fewer people traveling, it might make sense for the city to take on some of its road maintenance projects as early as possible, Coddington added. That is assuming nonessential construction will be allowed, at some point, to resume.