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Surprise City Manager Mike Frazier probably summed it up best when he started his presentation at the recent city council budget retreat by saying, “What a difference three weeks makes.”
The COVID-19 pandemic that has wreaked havoc across the globe has trashed Surprise’s previous budget plans for the upcoming fiscal year.
Just in time to deal with the crisis head on — and the financial uncertainty it’s bringing — city budget officials are working on putting together a contingency plan based on reduced revenue. But they’re also trying to be flexible in case things get better faster than expected.
“We’re planning for the worst but hoping for the best,” Vice Mayor Chris Judd said at the all-day March 27 budget retreat.
The budget presentation Mayor Skip Hall and the city council heard that day was much different than the one staff had prepared weeks before after nearly five months of interviews with department heads.
“That is old news,” Mr. Frazier told the council. “Who would have envisioned that we would be involved in a worldwide pandemic just three weeks later.”
City officials say Surprise will be taking a significant loss in revenue, just like all Arizona cities will.
But how much is unknown, especially since nobody even knows when the worst will be over.
“Definitely this presentation looked a lot different a couple of weeks ago,” Ms. Davis told the Council. “I definitely lost a lot of sleep over this one, which worked out well, because there was more work to do, so that helped.”
Mr. Frazier said the length of the shutdown will determine how bad the financial situation is here.
“We know that we are dealing with reduced revenue projections,” he said. “And although the experts think it will be short-lived, they can’t agree on what short-lived is. I’ve heard six months, I’ve heard eight months, I’ve heard four months. Who knows? So that’s just something we’re going to have to work through.”
Ms. Davis pointed out the fiscal year 2021 forecast has changed, but she said “the needs of the city have not changed.”
“We need to take immediate actions, and we have, to offset those revenue losses we’re experiencing right now,” Ms. Davis said. “What we don’t know is how long and how drastic.”
The city has instituted a hiring freeze on non-essential positions and has eliminated all non-essential spending.
Ms. Davis said they plan to continuously monitor revenue projections, re-evaluate the timeline and priority of capital projects and make more spending cuts where needed.
Because sales tax reporting has a two-month lag before the cities know the numbers, Surprise won’t learn how bad the first throes of the pandemic were for a couple of months.
“We won’t know until June what hit we took in March,” Ms. Davis said.
In a normal month, Surprise collects about $4 million in sales tax revenue, but March is usually higher than normal because of the spring training crowds. The city also takes in revenue from surcharges and fees on spring training tickets.
Games were cut short by one-third, however, when Major League Baseball shut down camps March 12.
Ms. Davis said the city had some savings from not having to staff the remaining week and a half of spring training but that it didn’t offset the lost revenue from the games themselves.
The loss of operating businesses across the city, especially in-dining restaurants, will add to the tax hole.
“How much sales tax from toilet paper and paper towels is going to offset tacos and steaks?” Mayor Skip Hall joked about the current paper product shortage in Surprise stores.
Some other food staples are also in short supply, but the hording of food items doesn’t help the city coffers because it doesn’t collect a food tax.
“This particular situation we have today is like a tsunami hitting and we don’t know how long it will last,” District 4 Councilman Ken Remley said. “That makes the forecasting almost totally impossible because you just don’t know.”
It’s a balancing act the city is trying to pull off. City officials know they need to trim, but they don’t want to cut too much.
“Since it’s unprecedented, and we don’t know where we’re going to be, I want to plan for every possible outcome,” Ms. Davis told the council. “Because the worst thing could be 12 months from now be fully recovered, be able to afford people, and we need it to maintain our level of service, but we can’t because we set the budget low because we were worried about the future. So, it’s really trying to find that balance to be nimble.”
Ms. Davis said the city is tracking its losses of revenue for potential reimbursement from the federal government through the recently passed stimulus bill. She said losses from spring training revenue could be part of that payback.
“We’re still getting clarification of what’s eligible, but we’re tracking everything just in case it’s all eligible,” Ms. Davis said.
The city also has to figure what it’s going to do about library hours since it doubled the hours earlier this year at the Hollyhock Library, 15844 N. Hollyhock St., and opened the doors to the new Asante Library, 16755 W. Vereda Solana Drive, in February.
“We don’t need to be fearful,” Mr. Remley said. “We need to be hopeful. But we also need to be prepared. I like the idea that we have a budget that if things work out for the very best we’re prepared for that. And if it works out something less than that, we’re prepared for that.”
Former NAU Lumberjack who loves going to concerts (or I did), watching sports (or I did) and hanging out with friends (oh, never mind). I also enjoy backgammon, surfing and men who are not afraid to cry.
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