Annual budget preparations are approaching as Lenoir City and Loudon assess the financial impact of COVID-19.
Numerous businesses were forced to close or adjust in March and April. Governments must use tax revenue estimates for the two months since real data won’t be available for at least another month, Maggie Hunt, Lenoir City recorder/treasurer, said.
“I talked to the state comptroller because I wanted to know what are other cities doing because everybody’s in the same situation that we are,” she said. “He says they’re passing a budget, estimating what they think the numbers will be. What we’re going to do is look at our budget in six months after we pass this new budget and see if we are making more revenue than we thought we would. Are our expenditures higher? Then we’ll do adjustments then because we’ll know more about how the virus has affected everything across the board in six months.”
Loudon is looking to the University of Tennessee Municipal Technical Advisory Service for guidance.
“The budget will be impacted by COVID because … we can only estimate and project reduction in revenues,” Ty Ross, Loudon city manager, said. “In that regard, we’re following the herd, and we’re going with MTAS projections that show state share funding that’s coming out from state-collected revenues like sales tax, beer taxes, gas taxes. They collect all that money and distribute it out to the cities based on population, but they’re projecting a 10 percent reduction in that revenue. So that’s what we’re projecting for the city of Loudon revenues in general is a about a 10 percent reduction.”
Fortunately, a majority of Loudon’s revenue — close to 50 percent — comes from property taxes, which haven’t been affected by the pandemic, Loudon Mayor Jeff Harris said.
Hunt said Lenoir City is hoping big box stores like Walmart and Home Depot can pick up whatever slack is caused in other areas of the community. Hunt has been told those stores have been experiencing record sales and trusts that can balance the city’s numbers.
In the event it can’t, Lenoir City will dip into reserves.
“Luckily, we have a great fund balance,” Hunt said. “We have prepared for something like this happening. We have a $4 million fund balance. By the state’s recommendation, $2-2.5 million is what the fund balance should be. So we are really prepared for this kind of situation.”
Lenoir City Mayor Tony Aikens said the city will use reserves before even considering raising taxes.
“The main thing is they can expect to see no tax increase,” he said. “… We believe that because of the amount of reserves we have built up for emergencies, and certainly this is an emergency, that we can dip into the reserves … and balance the budget. We anticipate the budget being $200,000-plus short, and it may be more than $500,000 short. That’s a lot of money for Lenoir City government. … It’s tough times, and we’re certainly not going to burden the taxpayers.”
Ross will recommend holding steady to Loudon City Council at Monday’s workshop.
“We are not recommending to the council any reduction in service,” he said. “What we are recommending to the council is a static budget from which we want to spend on personnel, payroll and benefits and head count, what we spent last year, but no increases other than the prior promise or assurance of adequate funding for the health plan. … Normal times, you might look to if there’s enough money coming in to enhance services, whether it be with additional headcount or higher pay for existing head count in the form of raises.”
The proposed budget will also limit capital expenditures to “just gotta have stuff,” Ross said.
“There are a few things that we’re going to spend our focus on for some investments in the community that are needed,” Harris said. “Queener Road, that construction’s going to start early fall, so we have to set funds aside for our portion of that. There’s a need for a new fire truck, and instead of paying for that all at once, we’re going to take a financing approach and spread that out over five years so we don’t liquidate our general fund so much. We’re looking to do a lot of paving … and looking at maybe going into debt service for that because it’s really affordable right now.
“The police department needs new computers for their vehicles … and we’ve worked out a plan to do half this year and half next year,” he added. “The public works department needs a new leaf machine, and that’s something that’s been put off and put off. We’re keeping things to a minimum and keeping our budget as static as we can keep it.”