The city of Little Rock is beginning to get a limited look at the impact of the coronavirus pandemic on its finances -- lower revenue and the prospect of more budget adjustments.
Though city officials will not know the impact on sales tax revenue until June, they have seen declines in charges for services, permit fees and parking revenue.
The city already has cut its budget once because of the global health crisis and accompanying economic uncertainty. City directors approved a nearly $5 million budget adjustment April 1, which amounts to a roughly 2.3% cut in the $212 million budget that the city board initially approved in December.
The April 1 measure included furloughing nearly 200 part-time workers and cutting funding for summer programs that officials said were not feasible to hold because of public health concerns.
Little Rock finance director Sara Lenehan said the department will take further budget amendments before the board as the economic impact and the duration of the pandemic become clearer.
Mayor Frank Scott Jr. said "everything is on the table to ensure fiscal stewardship."
"It's always a challenge to forecast the unpredictable and the unknown," he said.
The city closed its recreational facilities, including golf courses, the Jim Dailey Fitness and Aquatic Center and the Little Rock Zoo, starting in mid-March, which has resulted in a decrease in revenue from charges for services.
From the beginning of the year to April 30, zoo revenue was down $852,928 from the same time period in 2019, to $332,399, according to preliminary numbers from the city.
Golf revenue was down $86,772, resulting in $103,399 in revenue for this time period compared with 2019's $190,171. Revenue at the Jim Dailey center was down $50,674 to $127,422, compared with $178,096 for the same time frame in 2019.
The city also lost money from issuing refunds for any community center or park pavilion rental that was planned during the past month and a half. The Parks and Recreation Department took a $62,391 hit, compared with the $135,752 it took in from the beginning of the year through April in 2019.
Revenue from building permits and related permits was down $74,845 from the same time period in 2019, to $757,215, though Lenehan noted such activity continues.
"The good news is while it has been a little bit reduced pace, there has been continued applications and continued activity, so we're hopeful that that will continue," she said.
The city is also grappling with negative outlooks on bond ratings.
On March 26, S&P Global Ratings revised the outlooks on nearly all long-term debt ratings in the transportation infrastructure sector in the United States to negative, including the city's 2003 capital improvement and refunding bonds for downtown parking projects.
Lenehan said the city confirmed that Little Rock has sufficient cash and investments to meet the debt service obligations on those bonds for 2020, and the rating agency will determine whether an adjustment to that outlook is required.
Though daily parking revenue is expected to decrease, dedicated business license revenue, street-cut fee revenue and monthly parking contracts coupled with reductions in labor, maintenance and security during the pandemic will provide sufficient funding for the $888,448 that the city owes in debt service for the bonds in 2020, Lenehan said.
The ratings agency also gave a negative outlook on bonds secured by hospitality taxes because of the pandemic's impact on travel and consumer activity, which includes the city's 2018 hotel gross tax receipts bonds to fund the Arkansas Arts Center reconstruction.
The city has sufficient funds set aside for a June 1 debt service obligation of $686,072, but projected revenue and remaining funds are expected to fall short of the amount required to meet a payment in December, so it will dedicate the proceeds of a penny sales tax that it received before the bonds were issued.
Lenehan said she plans to present a resolution to the city board to dedicate those funds.
She said she anticipates that Little Rock will have no trouble meeting its other bond obligations because they are primarily secured by dedicated property tax revenue that is assessed one year and collected the following year.
The city has been allocated or received about $1.75 million in federal aid because of the pandemic. The U.S. Department of Justice Bureau of Justice Assistance has allocated $786,845 to the city for coronavirus-related expenses. The grant may be used for overtime pay, personal protective equipment, and other supplies and expenses related to covid-19.
The city is receiving $960,265 in U.S. Department of Housing and Urban Development funds from the Coronavirus Aid, Relief, and Economic Security Act. Of that funding, $879,049 went to the city's community development block grant program and $81,216 went to the Housing Opportunities for Persons with AIDS program.
The community development block grant allocation was used to fund a covid-19 testing site at the Southwest Community Center last Saturday, mask distribution at grocery stores and $500,000 for a forgivable loan plan for small businesses in Little Rock.
Federal aid that Little Rock has received is targeted at additional expenditures that the city is facing because of the coronavirus. But coronavirus-related revenue losses will likely have a much larger impact on the city's budget than those expenditures, Lenehan said.
The federal stimulus did not provide direct relief to cities with populations below 500,000 -- Little Rock's is nearly 200,000 -- and it is not clear whether Arkansas will share its state allocation with municipalities.
Scott said the city -- in consultation with City Attorney Tom Carpenter -- is looking at ways it can conserve funds while avoiding more furloughs and workforce reductions, including salary reductions.
Metro on 05/06/2020