Council Discusses Financial Impact to the Town Due to COVID-19

At the April 14 City Council Meeting, Addison's Chief Financial Officer Steven Glickman presented a range of potential financial impacts of the COVID-19 pandemic for the remainder of Fiscal Year (FY) 2020 and for FY2021 for all Town funds. Historically, funds like the General Fund and Hotel Fund have been affected by crisis’ such as 9/11 and the Great Recession, while the Town’s other operating funds, like the Airport Fund and Utility Fund, have not seen significant changes.

Mr. Glickman shared that the primary concerns are sales taxes and mixed beverage taxes for the General Fund, hotel occupancy taxes for the Hotel Fund, and fuel flowage fees and rental income for the Airport. Historically, it has taken three years to see a full recovery for these revenue sources following a crisis.   
Current estimates indicate that for FY2020, the General Fund will experience a revenue loss of nearly $1.7 million. Staff has identified savings in various line items to help offset the shortfall, including postponing scheduled aesthetic upgrades at the Athletic Club that are not part of future bond projects.
Staff is forecasting a reduction in sales tax in FY2021 in the General Fund of between 10% - 16%. Any impact from property taxes is not anticipated to be realized until FY2022.

The Airport Fund is projected to see a decrease of rental income of $509,000 in FY2020 and a 7% to 11% reduction for FY2021. Staff also estimates a decrease of fuel flowage fees of $457,440 in FY2020, as well as a 29% to 41% decrease for FY2021. FY2020 revenue decreases are being offset by a TxDOT Land Reimbursement of $1,310,000 as well as some salary savings.

The Hotel Fund has been the most impacted by the pandemic. Revenue from this fund comes from hotel occupancy tax, proceeds from special events, and Conference and Theatre Centre rentals. Staff is forecasting a loss of revenue of more than $3.8 million for the fund in FY2020, $3.1 million of which comes from the loss of hotel occupancy tax. The current calculations assume that Taste Addison will be canceled this year. The event has currently been postponed. A decision on Kaboom Town! and Oktoberfest has yet to be made.

While staff has been able to identify expenditure reductions of more than $1 million, the revenue loss from the hotel occupancy taxes is insurmountable. This will result in a reduction in the Hotel Fund reserves.
Staff anticipates the Utility Fund to realize a decrease in water sales of just over $350,000 in FY2020, as well as a 3% to 8% decrease in FY2021. That shortfall can be offset by water purchases/sewer treatment savings of $45,000 and by funding a sewer line relocation project with project savings from 2014 certificate of obligation bonds rather than using cash.

Staff informed Council that these estimates are subject to change and will be updated as new information becomes available.

You can watch the Council's Budget discussion here and review the presentation here.