The economic impact of business shutdowns due to COVID-19 is going to take a toll on the City of Stillwater’s finances, City Manager Norman McNickle told the City Council on Monday night.
When the meeting was originally scheduled, it was a study session where he and Finance Director Christy Cluck would present recommendations for the city’s fiscal year 2021 budget.
But recent events have rendered that budget obsolete before it can be adopted.
“I don’t know that there needs to be much discussion about it because it’s pretty unrealistic,” McNickle said. “You have before you a balanced budget. But since that time, looking at the potential impact on city revenue for 2021, it’s not a great picture.”
McNickle presented a graph of the city’s sales and use tax revenues over time.
Fiscal year 2014 was the high-water mark for the city based on combined sales and use tax revenues. This year’s revenue was projected to exceed 2014 by $200,000, he pointed out, but because of inflation, the city’s purchasing power has actually decreased over the past six years.
Prices rose 9.27% in that period.
McNickle said with the city set to lose almost half of its population with Oklahoma State University shutting down its campus and students leaving early, sales and use tax revenues could be cut by one-half to two-thirds.
A resolution passed by the Stillwater Utilities Authority giving grace to people who have lost their jobs and can’t pay their bills, will contribute to that as well, he said.
“We will get through this,” McNickle said. “We have sufficient reserves to weather the storm but that will be painful because we have to think about not only COVID-19, we’re currently in the possibility of severe weather and other issues. We’ll have to pretty quickly replenish those reserves.”
Cluck presented a budget for fiscal year 2021 that projected $120.1 million in revenue, just slightly larger than last year thanks to a projected $900,000 gain in use tax.
McNickle described the current budget as a placeholder to satisfy statutory requirements. It could be June before city staff has actual numbers.
“That’s assuming we get back to normal business in August,” he said.
Cluck told the council the budget she was presenting can serve as a springboard once staff has more information.
Members of the finance staff are generating scenarios and options depending on what happens over the next few months.
Expenses were projected to be lower than last year’s $115.5 million at $109.7 million. The decrease was due to cuts in spending from the City Capital Fund and lower power purchase costs.
The SUA will spend less thanks to a new Grand River Dam Authority rate structure that reflects more hydroelectric power and lower natural gas costs.
The SUA is also saving money in the current fiscal year.