City council members recently took a deep dive into city funds most affected by the COVID-19 pandemic, and despite anticipated losses in revenue, the city still expects to end the year with a healthy fund balance.
City Finance Director Alberta S. Barrett presented a financial report on the funds to the Del Rio City Council during its May 12 meeting.
Barrett began her presentation with a review of the city’s airport fund.
“Revenues in the airport fund do not reflect a loss at this point. However, in May the number of flights will be reduced to one arrival and one departure (per day),” Barrett told the council.
She also pointed out the airport will receive $69,000 through the federal CARES Act Grant, and she said the annual transfer from the general fund into the airport fund will be lowered by that amount.
“Overall, the airport fund is projected to have a loss of $23,795,” Barrett said.
The finance director noted toll revenues at the city’s international bridge for the current fiscal year are projected at $7,300,000, which is $887,844 less than the $8,187,844 initially budgeted, a result of the COVID-19 pandemic, Barrett said.
She noted because of the decrease in bridge tolls and an expected $45,000 decrease in interest income, a transfer to the city’s general fund from the bridge fund will be lowered to $5 million, rather than the $6,557,718 budgeted.
Barrett said expenses in the bridge fund are expected to be less than anticipated. She said the city had projected $8,268,185 in expenses. That estimate has now been revised to a projected $7,400,800 in expenses.
Barrett said the city’s gas fund is expected to see $477,256 more in revenues due to more gas sales than budgeted. Expenses in the gas fund are expected to be $230,600 less than budgeted because of five vacant positions in the department, Barrett said.
She called the gas fund “very healthy.”
Councilwoman Diana Bejarano Salgado asked about the five vacant positions in the gas fund.
“What is the plan for filling these positions, and how essential are they?” Salgado asked.
“These are four heavy equipment operators, and often, I think it’s the pay. It’s really hard to recruit at that. One idea was to reduce the number of positions and increase the pay (for the remaining slots). That is one approach that I’ve been contemplating, but I think it’s the pay scale for heavy equipment operators that makes it hard to recruit for,” Wojnowski said.
“We need to take a hard look at that during this budget cycle, because you just can’t expect somebody with a CDL (commercial driver’s license) to be working for whatever we pay, $12 or $13 an hour. We need to be able to pay them some more money,” Councilman Alfredo “Fred” Carranza Jr. added.
In the municipal facilities fund, operating revenues are projected to be down $34,432 to a total of $174,100 from the $208,532 in revenues that had been budgeted at the start of the year.
“The revenues in this fund are down due to not being able to rent out the facilities due to COVID-19,” Barrett said.
Overall, she said, the municipal facilities fund is expected to see a loss of $8,188 by the end of the fiscal year.
Barrett said the operating revenue in the municipal facilities fund is driven by rentals of the Del Rio Civic Center and the Paul Poag Theatre for the Performing Arts.
“For the civic center, we had budgeted $173,632 in revenues, and we’re projecting about $115,000. Same with the Paul Poag. We had budgeted $18,000, and we’re projecting only $5,000. Once we’re able to rent these facilities out again, we could possibly see some increase in these revenue line items,” Barrett said.
In the refuse fund, Barrett said, interest income is projected to be $35,000 less than the $65,000 budgeted as “interest rates are much lower than the previous year due to the COVID-19 pandemic.”
Recent storms, though, will prove a boon for this fund, she said.
“The landfill charges are expected to be approximately $100,000 higher (than budgeted) due to an estimated increase in activity as a result of the storms the city has recently experienced,” she said.
“Total expenses are projected to total $6,076,036, which is $110,361 less than the $6,186,397 budgeted. Overall, the refuse fund is projected to add $278,964 to the fund balance instead of the negative $304,247 budgeted, bringing the estimated ending fund balance as of Sept. 30 to $4,120,806,” Barrett added.
In the water fund, Barrett said, the city budgeted $9,950,000 in total water service charge revenues for the year, as well as an expected revenue from penalties of $250,000. Since the city is not charging penalties on accounts because of the COVID-19, it is expected to lose that $250,000, Barrett said.
She said total revenues were anticipated $10,248,600, about $204,900 less than the $10,453,500 budgeted. A decrease in personnel costs – the result of seven existing vacancies – will cause a reduction in operating expenses of $207,696 from the $2,312,696 budgeted, Barrett said.
“Total expenses are projected at $9,846,413, which is $573,646 less than the $10,420,059 budgeted,” Barrett said.
Barrett said in the city’s wastewater fund, “sewer service charges are projected at $5 million instead of $5,120,000 budgeted due to the city offering the lower sewer average billing for this next year.”
“So your total revenues will be $5,120,500, about $176,000 less than what we had budgeted,” she added.
Total expenses in the fund are projected at $5,042,124, $336,647 less than the $5,378,771 budgeted, Barrett said.
Barrett said the wastewater fund will end the year with a fund balance of $4,428,379.
Hotel Occupancy Tax Fund
In the hotel occupancy tax fund, Barrett said she now estimates HOT receipts will be down about $150,000 from the $750,000 budgeted.
“However, hotel occupancy tax revenues may increase with the number of vendors/contractors that have come to this area due to the recent storms,” Barrett said.
The final fund examined during the meeting was the city’s general fund.
This fund is expected to see a 7% drop in sales tax revenues, $442,893 less than the $6,042,893 budgeted.
“This projection is estimating that receipts will be down 30% based on the anticipated effects of the COVID-19 pandemic. Sales tax revenues received in May was down 10% compared to the same time last year, and receipts received in April were down 15%. Year-to-date, these revenues are down 35% from the prior year. If this trend continues, sales tax revenue will be higher than the $5,600,000 projected,” Barrett said.
She said the city’s general fund is also expected to see decreases in revenues from municipal court fines, state violation fines, recreational programs, golf course revenues, electrical permits, plumbing permits, garage sale permits and interest income.
Barrett said revenues in building permits may meet the budgeted amount due to the number of roof permits the city is expected to issue.
Lower bridge revenues will also mean a smaller-than-budgeted transfer from the bridge fund to the general fund, Barrett said.
The city had budgeted a transfer of $6,557,718, but has now revised that figure down to $5 million, she said.
“The general fund and interest and sinking debt service property tax revenues are projected at $28,506,100, which is down $2,122,479, or 7%, from the budgeted amount of $30,628,579. . . General fund expenditures are projected to total $28,338,100, down $3,042,099 from the $31,380,199 budgeted,” Barrett said.
Currently, the city is expected to end the year with a fund balance of $11,436,175, which represents about five-and-a-half months of operating expenses, she said.
“If we keep the three months’ reserve out, you’ll have about $5.1 million in excess revenues,” Barrett said.
Councilman Jim DeReus asked about the various strategies being proposed to cut operating costs by certain percentages in the funds anticipating losses by the end of the year.
“What are you doing to cut operating costs?” DeReus asked.
“It could be supplies or miscellaneous. Most of your contractual costs can’t be cut because they’re preset; your water and your electricity, those type of expenses. We’re looking at other (expenses) that aren’t set,” Barrett said.
“Basically, non-essential operating costs,” City Manager Matt Wojnowski added.
“So my question is, if it’s stuff that we can cut, why is it in the budget to begin with, because this is just another reason why we have to be careful with the money we’re transferring out of these funds to the general fund, because we are operating at a significant deficit because of this right now, so if it’s not stuff that we really need, we need to look at cutting that type of stuff out of the budget, at trimming a little bit of the fat for next year, because we’re going to have to cut for next year,” DeReus said.
“Yes,” the city manager replied.