The city of Durango plans to make budget cuts and furlough employees one day per week to make up for an estimated $10 million budget shortfall.
Local municipalities around Colorado are preparing for the long-term economic impacts of the coronavirus pandemic. Durango City Council was briefed this week about the possible impacts and what measures must be taken to mitigate for the anticipated revenue shortfalls.
During Tuesday’s study session, councilors agreed staff should move forward with planned cutbacks.
“Shortfalls of this magnitude would exceed the Great Recession,” said Devon Schmidt, the city’s acting director of finance. “The major differences obviously being how that recession formed versus this one (which is) a very sharp, drastic decline.”
The city anticipates an overall reduction of 30% of city sales tax, or a $7.9 million shortfall, through 2020. City staff also expects a $2.1 million decrease in revenue from licenses, services, fines, forfeits and other revenue sources.
When other tax losses – such as the use tax, lodging tax and city-county joint tax – are accounted for in the overall budget, the total shortfall would increase to $12 million. With this loss projection, the city would move into its third most-serious response scenario, labeled “catastrophic,” with even more severe cutbacks. City Council did not plan to act on this scenario during Tuesday’s meeting.
Durango plans to start staff furloughs for most positions May 8 and institute a hiring freeze on open positions. The weekly eight-hour furlough, which lasts through the end of 2020, is a mandatory reduction in work and pay with no use of available paid leave. The move would likely save at least $3.3 million.
Reducing part-time hours would save the city at least $1.5 million.
About 515 of 532 part-time or seasonal employees cannot work because of closed city facilities or the stay-at-home order, which has now expired. As the city reopens, these noncritical employees might be able to return to work if the budget loses only $5 million to $7 million. With $10 million in expected losses, these employees would be able to return to work only if they are needed for services, according to a staff presentation.
Among full-time, noncritical employees, six are out of work, and six have reduced hours by 50%. They can use their benefits, but the city plans to analyze benefits packages for critical and noncritical employees if the revenue shortfall deepens.
“Any of these furloughs are a big deal to (city staff) personally. It’s a big deal to the city,” said Councilor Chris Bettin. But the city has a statutory obligation to avoid debt, he said.
“We do not go here lightly, and it certainly is hard to do,” Bettin said.
City Council members also widely supported cutting their own pay by 20% to correspond with the city staff furloughs. City councilors receive $867 a month and the Mayor receives $1,117 a month.
“We need to be leaders in taking this on, too,” said one councilor during the virtual meeting. It was unclear who was speaking, because the city broadcasts only audio from study session meetings.
The City Council already deferred millions of dollars for capital-improvement projects in early April and might choose to defer more. The city will also restrict purchases over $5,000, eliminate travel and training costs, and reduce other operational expenditures. These restrictions would save the city at least $1.7 million.
Durango could save an additional $774,000 by reducing noncritical maintenance and repairs and deferring some projects, like the police station remodel.
Durango planners expect to see some economic recovery in September through December. However, if the virus resurges during the winter flu season, that projection would change.
“This is an ever-changing situation, and we can base our projections on the best information we have each day,” said Amber Blake, interim city manager.
As revenue falls, federal and state financial relief is not guaranteed for Durango. The CARES Act does not guarantee relief funds to cities with populations of less than 500,000 people, and those funds do not cover lost sales tax revenue. Durango also does not know if it will receive Colorado CARES Act funds, disbursed by Gov. Jared Polis and his administration.
“There’s been a number kicked around of what Durango might receive, and it’s not $13 million, that’s for sure,” said Mayor Dean Brookie. “We’ve got a lot of work to do.”
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