On Monday, March 30th the Personnel and Finance Committee got an update on “Fiscal Impact of Coronavirus on Dane County.” The minutes are from March 9th, the recording doesn’t seem to be available yet, and there are no attachments with this presentation.
I called in and recorded it. It’s on an old recorder and in a weird format, if I have time to figure it out, I’ll try to upload it.
OVERVIEW FROM STAFF
Chuck Hicklin, their Controller, or head of their finance department, says he was asked to do an overview of what they think the fiscal impact of the coronavirus will be on the county budget. As the County Executive outlined in his presentation to the county board, there are two main revenue sources in the county that will be impacted by the virus itself. The interest earnings will plummet – they had $2.2M in 2019, and we budgeted about $2M for 2020. We may be in a position where we get a few hundred thousand by the end of the year. Interest rates that were nearly 2% are in the .2% or less and fluctuating daily. The places the County Treasurer has our funds invested are pretty sensitive to these quick changes in interest rates and we expect that to be a shortfall of $1.8M.
The most concerning impact is on the area of sales tax. Even as we prepared the county executives remarks for the hiring freeze that was presented to the board a couple weeks ago, it was difficult to imagine how much change was going to occur in the last two weeks. With the governor’s orders for non-essential businesses to cease, for restaurants to close or only have carry out, for gatherings to be smaller than 10, it’s just going to have a very drastic impact on our budget. Eating and drinking establishments and hotels come to about 5% of our sales tax receipts per year. The impacts on those businesses are going to last for quite a while. He would assume even if some of the most restrictive measures are lifted, it is going to be difficult for people to gather with the virus still present until there is a vaccine that is widely administered to the population. While the most extreme measures that we are experiencing today may be lifted sometime in June, it’s hard to believe that when people are going to go back to crowded restaurants and movie theaters and events of that nature when the virus still exists within the nation’s population. Many of the businesses will fail as a result of this. Public Health acknowledges that in their pursuit in the reduction of the fees you just approved so you can minimize their impact on the establishments that they inspect. But their feedback has been that they expect 30% of the currently licensed establishments may not emerge from this shut down.
Another big area is auto sales and other retail sales. They are taking a really drastic hit. Some of these because people are losing their jobs, the income that is available to spend in the community is going to decline. We don’t know what that impact is going to be, there is no way to project it. The sales taxes for the fiscal year for 2020 begin with the March sales tax, those are the ones we receive in March. They just received that payment today, that was a healthy payment compared to March of last year. Those were sales that were generated by retailers during the month of February. So we’re going to get some hit when the April receipt comes in, based on the first 10 to 15 days of the month which looked normal, and then all of a sudden its completely abnormal in how long that last will be a big issue. He guesses they will be in a sales tax decline of near $20M. That is really going to take a hit. The county executive has frozen hiring during this period and we will be monitoring the savings that we receive from that every pay period. They will try to manage that, leave positions vacant so they can be evaluated in the budget process.
QUESTIONS OF STAFF
Alliant Energy Center
Supervisor Sheila Stubbs has a question. She asks about the Alliant Energy Center and their revenue with the cancellations for the Alliant Energy Center.
Hicklin says that before the Horse Fair had cancelled they had cancellations that amounted to an estimate $250,000 of net revenue or profit. The Horse Fair is the second or third (behind Crossfit and World Dairy Expo – which was cancelled.) This is going to be really tough on them, even when the most restrictive measures are lifted, travel will be depressed in terms of people who will come to Madison for events like that, events like Ironman and Crossfit. He is not sure they can imagine just how long it is going to take to crawl out of the shutdown we are in right now and that is going to have a devastating effect on the Alliant Energy Center – so yes, its a concern.
They ended the year with a reserve of about $1M. That will help mitigate that situation.
Airport
Stubbs asks about the impacts on the Airport?
Hicklin says he doesn’t have that information yet. The situation is just so new, so they will be monitoring all these changes as they come along over the next month or so.
$20M gap in sales tax
Supervisor Carl Chenoweth asks about the $20M shortfall for sales tax, is there any indication of how we will address that shortfall.
Hicklin says the tool is freezing hiring and there is no way to address that which will not impact the general fund during this fiscal year. Fortunately, as he mentioned during the committee of the whole presentation last winter, the county is starting the year with a pretty good reserve, that is going to help us weather through this as we monitor how long the impacts will be. One of the things that is a bright spot in this, the expenses that we are incurring like for housing the homeless, for purchasing protective equipment, purchasing the decontamination robot that was just approved, costs related to expanding capacity of the juvenile detention center to allow for better distancing, the county as a result of the stimulus bill that passed through the congress and was signed by the president late last week will be in line for some funding to mitigate those expenses. What we need to explore and what isn’t clear at this point, because it was just signed on Friday, is if any of that stimulus money can be used to mitigate these revenue losses we are experiencing or if other stimulus measures that Congress might adopt in the future might also help us mitigate some of those losses.
Airport
Kimberly Jones, the airport director, says it is a little bit early to know the specifics but the airport was included and named specifically in some of the funding packages at the federal level and they have worked closely with their congressional delegation to achieve as much inclusion into those packages as possible. They anticipate funding to help not only with some of the capital projects but also some of the operating costs moving forward. They continue to be open, people are still flying out of year, not nearly at the levels we had previously. She says on a normal day they would have 2-3,000 people fly out, yesterday they had 202 people. They still do see that activity and they are optimistic of additional funding in future federal aid packages as well that will be specific to the airport.
Reserve fund
Supervisor Chuck Erickson starts to ask about adjusting the budget that is approved by 2020 but then asks about the current reserve fund amount.
Hicklin says the auditors are coming next week. They will do the audit remotely, the general fund was about $43M at the end of 2019. That does give us cushion. As they started the last recession in 2009 it was a negative when we started. And just went further negative, so the county is in a much better position in the current fiscal year to work through this fiscal challenge. The question will be as we go through this year how much do we need to adjust base revenues for 2021 as we start to develop that budget. He says they don’t have an answer on that, because they are into an unusual situation. You could assume if sales taxes take a big hit during this fiscal year, that they are not going to recover back to $68M for 2021. On the other hand, we start recording sales tax for 2021 with the payments that we get in March of 2021. So we are 12 months away from knowing what our first payment for 2021 will be. He hopes to have better information for the committee as they go along and this won’t be the last of the brieifings the committee should request on this, as they know more and more.
Erickson asks what the $68M?
Hicklin says that is what is in the budget for 2020. He is suggesting they may be in the 40’s or 50’s by the year end. It is what they have in the budget, they have not received that yet. Anything less than that will be the shortfall.
Standing agenda item
County Board Chair Analiese Eicher asks to have this as a standing agenda item until they don’t need to any more.
Chair of the Personnel and Finance Committee Patrick Miles says he was thinking the same thing and he is guessing that some things will just be shortfalls in the budget, but there may be other things that require budget amendments and fund transfers. He says that he is sure Chuck will we willing to keep them apprised and they will have it as a standing item for the foreseeable future.
Operating vs. Capital Exenses review
Erickson asks about 2020 shortfalls, and since we have the reserves and we may be getting some money from the federal bill that just passed on Friday, how do we look at operating expenses vs. capital expenses. If we have already borrowed money for something, how will we look at that.
Hicklin says its completely different. The operating budget, if we have a revenue shortfall that will reduce, all things being equal, with reduce the general fund by the end of the year. Operating expenses are things like contracts, utilities, staff, most of it is staff or contracts or human services activities. Those operating expenses are the things supported by the sales tax, interest earnings and the property tax levy. The capital expenditures are supported by borrowing. If you freeze something on the capital side it doesn’t do anything to help the general fund, its not in the same category at all. The only thing different there is that to the extent they don’t borrow money then the levy could go down and in times when people are losing their jobs and things like that, that might be a policy that would be favorable because when you add the taxes on an average home, $50 is money out of people’s pockets. It’s fairly widely disbursed, but that is the only place where that kind of impact would occur. It is good to point that out because as we go forward with some of our capital projects, namely the jail project, there will be and may be people in the community or in areas that suggest that not spending money on the jail will help us hire people and that’s not the same thing.
Consensus in the chat box.
Miles announces that they seem to have consensus in the chat box to keep this as an ongoing item. (Note: the public cannot see the chat box, or the Zoom screen. The public can only call in.)
Miles says Clausius has a comment – but that he wants to wait until the end of the meeting.
Supervisor Stubbs has a question for Shawn.
Miles suggests they let Chuck proceed with his report, or is he done.
Hicklin says that is about it, they are looking at it closely as an emerging situation and he doesn’t have anything else to report other than answering people’s questions.
Freeze on capital projects
Miles says before they ask staff any question, he wants to know about if there is a time that the committee would like to consider putting a freeze on capital projects, he is not suggesting they do that yet, and he understands it doens’t help with the operating budget now, it’s a way to mitigate impacts in the 2020 budget when it comes to debt service. Is there a measure from the recession that the community used to guide them in making a decision to make a freeze back then.
Hicklin says he doesn’t recall if there was any specific target or anything like that. Most of the capital projects come to the committee in one form or another as a resolution to approve a contract and the method that the committee implemented at that time was that before a department got to the point of bringing a resolution to the committee, they should first come to the committee and make sure there was support for that capital project before they did an RFP for an architect/engineer or before they brought an agreement to enter into for road construction. The staff would come in and say they want to do a park shelter and then there was a formal motion that the committee would say “yes” go forward with the park shelter and then Public Works would go spend the time to do that and then months later the committee would be presented with a resolution with the bid results for a project like that. Capital projects have a long lead time so the one thing that the county procedures have changed since 10 or 12 years ago where the committee approves the activity in advance of borrowing very early in the year and authorizes the borrowing so that was not the practice back in those days so at that time many projects came forward with advanced borrowing embedded in a resolution. There are still capital projects that are getting underway now that were budgeted for 2019 for instance. He doesn’t think there was a target, it was just communication within the community. At the time wage reductions had been implemented and there was a sense to try to get balance even though capital doesn’t effect the operating budget, but people in policy positions, including the County Executive and the committee thought no everyone in the community understands that so if they see the county spending money on a capital project they don’t necessarily equate that with the fact that people are losing salary or programs were being curtailed. He says its a nuance in public finance but the two don’t really match up, but in the community that nuance isn’t always appreciated.
Reserves
Miles asks about the reserves, if they get to a point where they need to make use of the reserves, would there need to be a resolution or fund transfer that would require committee action?
Hicklin says no, not necessarily.
Miles laughs, can you clarify?
Hicklin says it has not been a practice to do midyear budget amendments in recognition of revenue loses like that. There is items in the budget and even going back to the times – the reserve itself has been growing now since about 2011, but before that when there were years that spending occurred that was not budgeted or revenues that weren’t realized, the budget is a plan. The county executive does the best to implement that plan as can be managed under the circumstances.
PPE for human services
Stubbs asks about PPE, there are community providers that are not on any list for gowns or gloves or masks and these are individual staff that work 24/7 in the homes of people with disabilities, so they are essential services and their shift cannot cease because they are providing care for vulnerable …audio cuts out… and elderly people in their home and we know these are some of the populations that have been considered the higher risk for COVID-19. How engaged are you in these conversations to help make sure we get these community providers on a list for PPE.
Shawn Tessman, Human Services Director, says this has been top of mind for her in a variety of facets related to the departments response. Shoring up and making sure that Badger Prairie has enough PPE. Trying to stretch things for our homeless services providers who are obviously also doing very close personal work with people. Our own staff also who are out in the community that are doing work with kids and youth by court order. Some of those essential services can’t stop and haven’t stopped and it has been a struggle. That has been widely reported that the supplies are not there, they have been working with Emergency Management and have been escalating our own needs with Badger Prairie and our own staff and she is happy to try to advocate as much as she can on behalf of any provider. She knows it is a huge issues for safety, for staff morale, for the customers we are serving. Staff may be asymptomatic and they could be carrying it. There is concern all around. She is as engaged in the conversation as she can be, without having a lot of great solutions. She says if Stubbs is comfortable forwarding that inquiry to her, she will do what she can, but the options and avenues for getting PPE out there are tough and limited. It’s an area of focus for her and public health and emergency management, its a topic of conversation they have daily.
Stubbs says she will share the email and she works really closely with Casey and if she gets emails she forwards them and your staff has been wonderful with responding back, especially for the homeless population and people who are volunteering who want to get food there. She has utilized a lot of support from Human Services for thank you.
More comments in the chat
Miles says Erickson had remarks in the chat when Miles was asking about the reserve, did he have follow up questions to that?
Erickson says no.
Airport
Erickson does have a question for Kimberly Jones regarding the airport, is it too soon to tell about the new direct flights that were going to be implemented from our airport to other larger cities. Do you know if those will be postponed or held off or is it too early to tell.
Jones says that what they have heard so far is that those seasonal flights that were to start in May time-frame have been pushed back a month, but they are still on the schedule and planning to be implemented at that point in time. It’s still too early to know what will really happen with all of their existing flights. Our non-stops to Las Vegas, Los Angeles, San Franscisco – a lot of those have been cancelled and essentially stopped for now. They do have approximately 12 flights daily going out. At this point the expectation is that all of the flights will eventually come back and the new services will start, but they are still in a wait and see mode.
Capital Projects
Supervisor Carl Chenoweth says the process that was in place in 2011 was more dealing with projects individually. His thoughts are, and he is cognizant of the community perspective, because this is really going to be a hardship on our community for the next 12 months regarding prioritizing our funds and its a hardship on the county. We really need to quickly put together some guidelines for department heads, especially dealing with land acquisition. We dealt with an issue tonight that went through regarding purchasing of land in the Town of Cottage Grove and he knows most of the deals have already been in place for some time, but we really need to take a long hard look even though this is a capital project, and we borrow for those acquisitions, we need to take a look at buying land over funding operations and processes that we need to take care of. We really need to do that as a committee, sooner than later. He hopes as they reorganize and reform and get our wheels under us in the near future, that they would come up with some type of guidance for departments to look at those acquisitions a little more closely.
