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HomeMy WebLinkAboutFIN 2021-03-22 Item 1B - Discussion - Service Level Prioritizationof Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance and Governance Committee FROM: Vicky Carlsen, Finance Director CC: Mayor Ekberg DATE: March 16, 2021 SUBJECT: Prioritizing service restoration when ongoing revenues exceed adopted budget ISSUE Staff is seeking Committee input into a process for how to prioritize service level restoration if and when ongoing revenues exceed revenues adopted in the 2021-2022 biennial budget. DISCUSSION Recap of Budget and Service Level Reductions The City has been impacted by the global COVID-19 health crisis since February 2020. The pandemic negatively affected revenue streams with reductions in sales and other taxes as well as user fees for recreation programs. Revenues continue to be impacted and it is unknown when, or if, revenue streams will return to pre -pandemic levels. Early on in the crisis, City Council and Administration took action to reduce expenditures in anticipation of the expected decline in revenue. In decreasing expenditures, service levels were necessarily reduced across all departments, but many of the reductions focused on lower priority programs. Reductions included the following: - Reducing labor costs by freezing vacant positions, layoffs, furloughs, and temporary pay reductions - Reducing overtime - Elimination of extra labor - Elimination of travel and non-essential training - Reduced transfers to Fleet - Reduced or eliminated low priority programs - Line -item budget scrub The 2021-2022 budget process began in the early summer of 2020 and continuation of the expected impacts of the pandemic were included throughout the proposed budget. High priority programs, such as human services, public safety, public works, and the court were funded to the extent possible. The proposed budget included support for key initiatives including: - Funding for human services - Continued implementation of the City's Equity Policy - Reimaging police services by starting a Mental Health Professional pilot program 5 INFORMATIONAL MEMO Page 2 - Maintaining current level of fire services - No additional service or employee reductions above reductions in 2020 - Continued investment in infrastructure - Investment in technology - Teen/Senior Center feasibility and programming While the proposed budget did include funding for the priorities listed above, several service reductions had to be maintained due to a continued reduction in revenue projections. During budget deliberations, the City Council directed the restoration of some services using the proposed budget surplus, including parks and street maintenance and additional funding for human services. While some service levels were restored through the budget and budget review process, several programs continue at a reduced level or were eliminated in the adopted budget, including: - Frozen positions in the Municipal Court, Parks, DCD, Police, Public Works - Elimination of SeeClickFix program - Reduction of extra labor in certain departments, eliminated in other departments - Reduction in supplies, non-essential training and travel across all departments - Elimination of commute trip reduction incentives - Elimination of funding for the Community Connectors program - Programming at the Tukwila Community Center In addition to the program reductions listed above, all departments have experienced general line -item budget reductions for 2021, which leaves no room for unplanned/unexpected expenditures that do occur each year. If revenues return at a higher level than adopted in the budget, the City Council will need to make decisions regarding the return of these services and service levels. 2021 Budget Issues Before service levels can be restored, it is important to understand pressures on the budget that will need to be addressed prior to restoring the service levels mentioned above. Some of the areas include: • Implementation of a previously agreed upon Teamsters' wage and compensation study. • Permit processing concerns due to impact of vacant and previously frozen positions to process workload which has remained steady during the pandemic. • Increase in Fire Department overtime costs due to a minimum staffing settlement agreement with the Local IAFF #2088. Ongoing vs One-time Revenues As Council and Administration consider how and when to restore service levels it will be important to keep in mind adopted financial policies that state one-time revenue will be used for one-time expenditures and ongoing revenue will be used for ongoing expenditures. This will also be an opportune time to re -envision how services are provided. Staff will be providing updated projections on ongoing revenues, such as sales 6 INFORMATIONAL MEMO Page 3 tax and gambling tax, to gauge how these revenues are matching or exceeding original 2021-2022 Budget expectations. There are also one-time revenues that staff will be tracking, such as possible Streamlined Sales Tax funds which may be allocated during the current state legislative session. State Funding - Streamlined Sales Tax (SST) Mitigation Funds HB 1521 would restore the SST funding program until 2026, which was approved by the legislature in 2020 but vetoed by the Governor due to the pandemic and associated revenue losses. There is an effort to add funding to the supplemental budget to replace funding lost during the current state fiscal year, which would result in Tukwila receiving just under $900,000 on May 1, 2021 if the effort is successful. While previously the SST funds were dedicated to the Public Safety Plan, staff removed that funding source from the plan when the Governor vetoed SST in 2020. Federal Funding - American Rescue Plan On March 10, 2021, a $1.9 trillion relief package, known as the American Rescue Plan, was approved and provides funding in several areas including state and local aid, education, rental assistance, and transit. At this time, it appears that the City of Tukwila will receive $4.43 million in one-time funds. It appears that half of the funds would be distributed 60 days after enactment and the remaining balance one year later. Because we are considered a nonentitlement city, we will receive the funds from the State rather than the federal government. It is unclear how quickly the State will release the funds to the City. Funds must be spent by December 31, 2024. These funds are not reimbursement for COVID-related costs, and therefore can be used in a variety of ways. From what we know today, the funds can be used in the following ways: - To respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses, and non -profits, or to aid impacted industries such as tourism, travel, and hospitality. - Provide premium pay to eligible workers that are preforming essential work. - Provision of government services to the extent of the reduction in revenue due to the pandemic relative to revenues collected in the most recent full fiscal year. - Make necessary investments in water, sewer, or broadband infrastructure. The funds cannot be used to directly or indirectly offset tax reductions or delay a tax/tax increase. Nor can funds be deposited into any pension fund. As new information becomes available, updated information will be provided. Other Funding for the Tukwila Community On February 19, 2021 Governor Inslee signed the state COVID relief bill that provides $2.2 billion in funding that has the opportunity to assist the Tukwila community, including: • $714 million in assistance for K-12 schools • $618 million for public health's response to COVID, including testing, investigation and contact tracing; and funding for vaccination efforts 7 INFORMATIONAL MEMO Page 4 • $365 million for emergency eviction, rental and utility assistance • $240 million for business assistance grants • $50 million for childcare • $26 million for food banks and other food programs • $91 million for income assistance, including $65 million for relief for the state's immigrant population The American Rescue Plan includes a variety of opportunities that can assist the Tukwila community, including: • Direct stimulus payments to qualifying households of $1,400 per person to single households making $75,000 or less and couples earning $150,000 or less. Individuals with dependents will also receive a $1,400 tax credit per dependent on their 2020 tax returns. • Enhanced unemployment payments of $300 per week. • Temporary child tax credit and monthly payments to qualifying households. • $7.25 billion in additional Paycheck Protection Program (PPP) loans for small businesses. • $128 billion in support for educational institutions. • Additional support for the most vulnerable, including more funds for Low Income Home Energy Assistance Program (LIEHEAP) for utility assistance, temporary increase to WIC funds and more. • $25 billion for emergency rental assistance. • $65.1 billion for cities. This memo and discussion are intended to begin the conversation so that committee members have a shared understanding of the service level decisions made in the 2021- 2022 budget process and begin to plan for future decision making as revenues return. RECOMMENDATION Discussion only. 8