Budget Committee: COVID-19 Update City of New Orleans May 5, 2020 - PowerPoint PPT Presentation

Budget Committee: COVID-19 Update City of New Orleans May 5, 2020

1. 1. Revenues

St Status s on on the e Rec econ onci cilia liation tion of of Reve evenu nues es in into o the N e New ew Fi Financi cial l Sys ystem tem  Statu atus s on the e Reconci onciliatio liation n of Revenues enues into o the e New w Financi ancial l System:  Treasury Bureau has completed the posting of January property tax revenues. - February and March are complete  Revenue Bureau has completed the posting of January and February sales tax collections. - Reporting is current  Safety and Permits has submitted all their reconciled cash to their respective bank accounts. - Now focusing on crediting accounts and updating BRASS 2

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY FY2020 Revenue Projections Changes  What modeling has been done thus far to estimate the potential revenue loss for FY 2020 and the current projections? - The Finance Department closely monitored the Sales Tax collections for January through April. Also, the current year’s sales tax revenues were compared month to month for fiscal 2018 and 2019.  Is this a moving target ($100 million, $120 million $150 million)? Why? - Yes, it is a moving target. The potential revenue loss was based on data collected from the City’s Revenue Sales Tax system and various bank accounts where sales tax payments are deposited. This information was used to compare month-to-month and year-to-year activities to get a better understanding of future collections. However, it is still an estimate. As more data becomes available, we will adjust our estimates to reflect more accurate and up-to-date information. 3

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY FY2020 Revenue Projections Changes  Can you provide a detailed, side-by-side comparison of the revenue estimates on which the budget was based vs. the current estimates? 4

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY FY2020 Revenue Projections Changes  Do you anticipate having a projected deficit for the city for FY 2020? - The city is currently in the process of refining our revenue projections, determining the level of state and federal support, reducing our expenditures by reevaluating departmental spending, and evaluating cash flow initiatives. It’s too early in the process to determine the outcome of FY2020. 5

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY FY2020 Revenue Projections Changes  What basis and/or methods are used in developing this projection? - The estimated budget deficit was calculated as a result of the projected $130 million in revenue shortfall (primarily sales taxes, fines, and forfeits) and the anticipated unbudgeted COVID-19 related costs of approximately $20 million. 6

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY Impact of COVID-19 on Revenue  Can you specify which revenue items are most impacted as a result of COVID-19 closures and if any areas of city finances that have remained stable or have increased collections? - The two areas most impacted as a result of COVID-19 closures are sales taxes and fines & forfeits revenue items. These two areas represent over 96% of our estimated losses. - As of April 30, 2020, over 97% of property taxes have been collected, currently representing the most stable revenue source for the city. 7

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY Impact of COVID-19 on Revenue  Can you provide the underlying assumptions on which any revised estimates are based (e.g. length of the estimated closure of non-essential businesses, impact of conventions/events that will be eliminated, decline in hotel occupancy etc.)? - With a high degree of uncertainty surrounding the pandemic, assumptions tend toward caution.  We assume official closures of businesses and public spaces will be approximately mid-March through mid-May, in some instances possibly extending longer, and that schools will not reopen for the 2019-2020 school year.  All major events are assumed to be canceled or postponed, and essentially all conventions are assumed to be absent.  We assume hotel occupancy rates will be less than 10% through June, and not more than 15% by autumn; we base these assumptions of hotel occupancy on estimates provided by New Orleans & Company.  Further, we assume that individual decisions will, on average, be cautious in response to the lifting of restrictions; for example, flight bookings will only gradually increase throughout the year. 8

2. 2. Fund Balance

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY Fund Balance  What is current estimated fund balance for the general fund? - In July 2019, we implemented several components of our new ERP (BRASS, AVL Tax system, and INOVAH) systems. Six months later, the city experienced a cyber-attack that required most of our financial resources to dedicate our efforts to recover. - As a result, we had to delay the submission of our CAFR by several months. Based on a high-level estimate and consistent with the information submitted in the FY2018 CAFR, we anticipate the FY2019 fund balance to total over $100 million. 10

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY Fund Balance  Is either the fund balance or the rainy-day fund calculated in the estimate of any projected deficit for FY2020? - No, the fund balance nor the rainy-day fund is calculated in the estimated of any projected deficit for FY2020.  Have all the collected property tax checks been deposited? If not, how many remain undeposited, and why? - Yes, all collection property tax checks have been deposited. 11

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY Savings Fund of the City of New Orleans City ordinance requires the Rainy Day Fund’s appropriation to be 5 percent of the average of the previous five years of actual General Fund expenditures Appropriations from the Savings Fund may only be Emergency Savings Fund made when one or more of the conditions have (October 2019 REC Forecast) been met: $32.0M $31.0M 1. An emergency which threatens widespread loss $31.0M of life or grievous injury to health or property $30.0M 2. A significant loss in City revenues due to an $28.9M $29.0M economic downturn of serious proportions has $28.0M occurred or is occurring $27.0M $27.0M 3. A mandate by the United States Government that has been determined by the City Attorney to be $26.0M in accordance with law $25.0M 2018 Actual 2019 Forecast 2020 Forecast 12

3. 3. Expenditures

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY 2020 Personnel Spending Year-to-date personnel spending patterns suggest that the City will end the year in a surplus of $16.7M Model Assumptions Year-to-Month Total Personnel Spending in 2020  2020 data through pay periods PROJECTED Full-Year Budgeted: $436.4M $450M ending March 28 th (Commissioned SURPLUS: $16.7M $400M Officers) or April 4 th (Administrative) $419.6M $383.8M $350M  No change in FTE count for any $348.0M $300M department, except NOPD hiring for Spending ($M) $312.2M three (3) recruit classes $250M $276.4M $240.7M  Overtime Methodology : 25 percent $200M $204.9M reduction in prior-year spending for $150M $169.1M all departments except Fire, EMS, $92.4M$133.3M $100M and JJIC (no reduction) $61.0M $23.3M $50M  Terminal Leave Methodology : prior- $0M year spending Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Budgeted YTD Spending Projected Spending 14

UNAUDITED PRELIMINARY PROJECTIONS FOR ILLUSTRATIVE PURPOSES ONLY 2020 Other Operating Spending Departments were tasked with developing a thoughtful and comprehensive budget reduction plan TOTAL OTHER OPERATING BUDGET: $263.5M OBLIGATED FUNDS UNOBLIGATED FUNDS $121.4M $142.1M 46.1% of total budgeted 53.9% of total budgeted Three types of obligated funds: The unobligated funds figure may be overstated because: 1. Expenditure : money that has been spent for the  Departments may have legal obligations or settlements that have not yet delivery of goods or services been committed or encumbered 2. Encumbered : approved funding for a purchase order  Departments may have not encumbered expenses that are central to (PO) or a contract fulfilling the essential duties of city government 3. Committed : funding tied to a requisition that has yet to be approved/processed and turned into a PO 15

Managing General Fund Expenditures The significance of the COVID-19 public health crisis will require the City to rethink how we budget and finance operations  Hiring and Spending Freeze : anticipate current freeze on spending lasting for the rest of the 2020 fiscal year and possibly into Q1 or Q2 of 2021  What impact is this having on the operations of the City? Besides closing City Hall, there have been no major impacts on the operations of the City (a mix of staff working onsite - and remotely to accommodate) Moved online for certain customer operations (such as Safety and Permits) - Not reduced any activity for infrastructure projects or capital projects -  Current funding priorities : COVID-19 related expenses - Personnel and benefits costs - Core government functions related to public safety - Core government functions that produce revenue - 16

4. 4. COVID-19 Expenses