“There is the very real possibility for [necessary budget] cuts,” stated Mayor Seth Fleetwood at the Committee Of The Whole meeting
By Seth Stevens
The increasing likelihood of a recession due to COVID-19 took center stage on April 27, at the Bellingham City Council meeting, as officials were forced to start what could be a rocky budgeting process.
In his memorandum to the city council, Mayor Seth Fleetwood outlined the process by which the city will adopt its 2021-22 budget: “We begin this budget process in a time of significant economic uncertainty,” Fleetwood wrote.
“There will not be funding to support expansions in levels of service or new programming without meaningful offsetting reductions or new revenues. Moreover, budget reductions may be required,” Fleetwood continued.
Seasoned Bellingham City councilmember and president, Gene Knutson, reflected on his years of service by stating, “Over my twenty-seven years, we have gone through some tough times.” Amongst these tough times, Knutson referenced the Olympic Pipeline explosion in 1999 that killed three people and the closing of the Georgia-Pacific Paper Mill in 2007 which led to the loss of more than 200 jobs. He also chronicled the 2008 recession, the most recent financial difficulty, when the city was forced to layoff 75 employees.
City of Bellingham finance Director Andy Asbjornsen has been closely monitoring the toll this crisis has already taken on the city’s budget, but the city’s finance department still lacks key data to make any official predictions on how much this pandemic will impact the city’s bottom line.
“We are actively working to try to come up with some sort of forecast,” Asbjornsen said. He continued by stating that Bellingham will not receive tax revenue data for April until the end of June, which lands during the Initial Budget Review period set by Fleetwood in his memorandum to the city council.
Asbjornsen explained that they are currently looking at other cities’ projected loss of revenue as somewhat of a loose comparison while the City of Bellingham Finance Department constructs their own.
On April 21, Seattle Mayor Jenny Durkan announced that the city expects up to a $186 million drop in collected general fund revenues compared to the original 2020 forecast. That equates to about 12% of the city’s annual general fund.
According to the City of Bellingham’s 2019 Year End Review, in 2019, Bellingham’s general fund had revenues of $88 million. This means if Bellingham sees that same potential 12% decrease in general fund revenues as predicted by the City of Seattle’s Finance Department, Bellingham can expect up to a loss of over $10.5 million in the general fund for 2020 alone.
But what exactly is the general fund? Bellingham’s general fund is responsible for the funding of 13 different departments within the city. The four biggest departments in terms of cost include police, fire, parks and recreation and libraries.
The general fund is financed by various taxes and grants. The fund’s top four revenue makers are business and occupation taxes, utility taxes, sales tax and property taxes; all of which are expected to take a hit.
Councilmember Michael Lilliquist, who served on the city council during the housing market crash in 2008 stated, “I’m having kind of an unhappy ‘dejavu’ feeling having gone through a recession before.”
With the 2008 recession still a fresh memory for most, Asbjornsen explained that this is not the same situation, and the data that the city has on how they handled that recession is not an accurate reflection of what we are currently facing.
Asbjornsen explained that they are analyzing data for any insights that may better prepare Bellingham to weather this recession, but he holds little faith in the reliance of that data because 2008 was a “completely different scenario.”
“We know that this is going to be a long recession of some sort … it’s going to be a challenge for all governments, all businesses, all people, with this level of uncertainty on what the future holds,” stated Asbjornsen.
Fleetwood’s top overarching goal for this budget process is to “ensure long-term financial stability for the City,” while also placing priority on funding public health and safety, climate action, affordable housing and homelessness, economic development and environmental remediation.
On Monday afternoon, during the Committee of The Whole meeting, which is a less formal setting designed for more open discussion on agenda topics, Fleetwood went over the same memorandum and stated, “There is the very real possibility for [necessary budget] cuts.” Fleetwood urged city departments to provide their proposed 2021-22 budget, with a list of potential ways to reduce expenses, “as a precautionary step.”
According to Asbjornsen, the city is preparing to make some “tough decisions” going into the budgeting process, and they will continue to look for areas where expenses can be reduced. He continued by stating, layoffs are not an “area that we have considered at this point.”
“Hopefully we can get through this without laying anyone off,” Asbjornsen said.
The official Bellingham city budget process for 2021-22 starts in May, whereby each department will draft their operating and capital budgets and submit it in early June for the Initial Budget Review. This will allow the city to use the data for COVID-19’s financial impact on the general budgets revenues for March-May, in order to make the proper budget cuts that may be necessary.