CLEARWATER — It is still too early to know how big a financial hit the city will take from the COVID-19 pandemic.
But as city officials prepare next year's budget, they are using worst-case-scenario numbers.
The pandemic could cost the city $9.4 million this year in lost sales tax revenue, beach and park rentals, and admissions and fees, according to projections discussed at a strategy meeting on Thursday. Coupled with increased expenses and modest growth in property values over the next few years, these preliminary projections factored in a need to raise property taxes earlier than anticipated.
If the city keeps the tax rate the same over the next decade, the reserve fund will dip in the red by 2025, with current revenue projections. But according to finance director Jay Ravins, the shortfall could be avoided if the City Council raises property taxes by 16 percent beginning in 2025, to $6.91 per $1,000 of assessed taxable value.
Last year, city officials predicted they wouldn’t have to raise taxes until 2027.
“The good news is that a (tax) increase is not needed immediately, and we have the ability to reduce or eliminate the projected (tax) increase between now and fiscal year 2025,” Ravins said.
Part of the uncertainty comes from the standard two-month delay in receiving sales tax numbers from the state, said budget manager Kayleen Kastel. The city does not yet have sales tax revenues for April or May, when shutdowns related to coronavirus were ongoing, complicating the normal projections made during budget season.
The projections discussed Thursday did not include proposed cuts to personnel or department budgets. City Manager Bill Horne said before the next budget meeting in August, the city should have more accurate data on sales tax revenue from March and April, as well as more information on whether federal stimulus money could flow to the city, making up for some of the losses.
“We just don’t want to cause any more anguish, any more anxiety than we really need to right now because everything could change,” Horne said.
Amid the losses, the city is also accounting for high dollar expenditures over the next several years. The city expects to contribute $6 million over the next five years to a potential renovation of the Philadelphia Phillies training complex. It has also budgeted $10.6 million for debt service and operating costs through 2025 for Imagine Clearwater, the waterfront redevelopment project.
After running a campaign this year with an environmental focus, city council member Kathleen Beckman, elected in March, said she would like to see the city make up for some lost revenue through cutting back on energy usage and behavior changes.
“I just think we can be creative with cost savings,” Beckman said in a later interview. “I think there’s ways to tighten the belt that don’t include cutting employees."
The city’s projections show no increase in property values in 2022 and two percent increases over the next two years.
Mayor Frank Hibbard, who was also elected in March, said he doesn’t expect the need for major cuts to departments or reduction in personnel that took place during the Great Recession, when he served his first two terms as mayor.
“This is a health and medical crisis versus a financial crisis,” Hibbard said. “It doesn’t mean that finances aren’t affected and businesses aren’t affected, but I don’t anticipate that we’re going to see the values of properties drop the way we did in ’08 and ’09. And that’s because there was so much speculation back then and there were so many defaults and so much property became available that the supply overwhelmed the demand. I just don’t see that this go around.”