ALPHARETTA, Ga. — Widespread business shutdowns and sheltered residents are taking a toll on government finances, and it’s likely to strain public coffers in the coming year.
That’s the word from Alpharetta Finance Director Tom Harris who reported Monday that sinking revenues could wipe out nearly all the projected surplus the city had expected to collect for the current 2020 budget year.
The news comes as a harbinger of possible rough sledding for cities throughout Metro Atlanta as they ride out the storm.
“We’ll still finish at budget or slightly above budget, but it won’t be as good as projected pre-COVID,” Harris told the Alpharetta City Council.
Harris said projections back in January — based on revenue trends and expenses at the time — showed the city ending the fiscal year in June with a surplus in its revenue of about $2.5 million. With fallout from the COVID-19 pandemic, he said, the surplus is now predicted to be about $184,000 — a drop of $2.3 million.
Worse, Harris said, if the falloff in sales taxes and hotel-motel taxes continues through the end of December, the city could face serious fiscal stress trying to fund the 2021 budget.
Expenses will be down
One offset to the drop in revenue, however, is that expenses will also drop because the city isn’t operating all the things it normally operates, like sports programs, classes and other services. The city has frozen positions, canceled travel and training, all public buildings are closed, and department heads have been told to shut down everything that is not essential.
Harris said he expects expenses to drop by as much as $2.5 million for the current budget year.
Alpharetta’s distribution from the countywide local option sales tax accounts for about $16.5 million annually in the city’s revenue, but Harris expects that number to fall short by half a million dollars. As early as February, he said, sales tax collections were down 7 percent, possibly because of the social distancing practices that began at that time.
Alpharetta will also take a big hit in hotel-motel tax revenue which was anticipated to bring in $9.2 million this fiscal year. Harris is predicting revenues to fall $750,000 short of what was estimated in January.
Alpharetta has nearly twice the number of hotels, 27, than all immediate neighboring cities combined, and the hospitality industry helps fuel its business model.
“We know the revenues are down, probably 85 percent from the beginning of March to the end of March,” Harris said, adding that occupancies are down along with rates for rooms. “Revenues collected by the hotels are probably at 15 percent of what they should be.”
Another major revenue source, recreation and special events, will take a big hit from the coronavirus shutdown, Harris said. He is predicting those revenues to fall almost $600,000 short of estimates. At the same time, however, the expense of operating some of the facilities, like the swimming pool, will go down, he said.
The city also collects $2.3 million in alcohol beverage excise taxes a year. Updated estimates predict that figure will fall by about $150,000, primarily through the loss of restaurant dining.
Alpharetta’s fiscal year ends June 30, so its current budget will be saddled in the homestretch.
Hoping for recovery
The 2021 budget, which is being drafted right now, is another matter.
A lot of it will depend on when things get back to some sort of normal operation, Harris said.
He said, if the pandemic subsides by the end of December, hotels could be operating at around 90 percent. Retail sales could pick up as well, he added.
The early take, Harris said, is that he is predicting a nearly $4 million deficit in revenues from what was earlier anticipated to fund the 2021 budget. That includes a 9 percent drop in sales tax revenue, a 27 percent decline in hotel tax revenue and a 19 percent drop in business occupation license fees.
Property tax collections are likely to dip, Harris said, especially among commercial properties.
Right now, he said, he is working with City Administrator Bob Regus to shave travel, training and other departmental expenses. Planned employee merit raises are also on the table for cuts, and there could be steps taken to shave recurring capital expenses.
“Again, it’s early, and I’m not trying to be a pessimist, but there’s probably a little bit of a higher chance that these numbers could get a little more negative,” Harris said.