TOWN PONDERS REVENUE SHORTFALLS AND POST-PANDEMIC CHALLENGES IN FRAMING NEW BUDGET

REPORTS ON JOINT MEETING OF THE TOWN COUNCIL, SCHOOL COMMITTEE, LIBRARY TRUSTEES, AND FINANCE COMMITTEE (5/11/20)
AND FINANCE COMMITTEE MEETING (5/12/20)

The members of the Town Council, School Committee, and Library Trustees met with the Town Manager Paul Bockelman, Comptroller Sonia Aldrich, and new Finance Director Sean Mangano on May 11 via Zoom webcast to discuss the Fiscal Year 2021. The discussion was continued the next day at a meeting of the Finance Committee which was also webcast on Zoom. Both meetings were also broadcast on Amherst Media’s Channel 17 and can be viewed here and here. 

Because they were uncertain how much revenue to expect for the fourth quarter of FY 2020, but with a likely shortfall expected to continue well into FY 2021, the members decided to develop a one-month budget (for July 2020) first, and then work on a budget for August through June. 

Bockelman’s slideshow report on the budget can be viewed here. .

Although revenues and expenditures through the third quarter of 2020 were on target, there are many areas of uncertainty after that. Property taxes, which make up 66 percent of anticipated revenue, are stable, but hotel, motel, and meal taxes will be down 75 percent in the fourth quarter. Income from the closed Cherry Hill Golf Course is nonexistent, and license and permit fees are down 65 percent. Due to the recent decline in the stock market, interest on investments is down 61 percent. With few college students in town, there is less income from water, sewer, and ambulance use. The Commonwealth has experienced a 14 percent decline in revenue. In contrast, the decline in revenue during the Great Recession of 2008–2010 was 10 percent. 

Unanticipated Town expenses in the fourth quarter included additional staff for the Police and Fire Departments, personal protective equipment for public safety personnel, additional staff for the Health Department, additional cleaning services, and technology expenses related to staffers working from home. 

In addition, the University will not make any decisions about its plans for the fall semester until June at the earliest. 

The Town might face increased costs with the opening of libraries and schools because of new safety guidelines. Morris stated that the schools must give notice by June 16 to any staffers who might be laid off, despite the fact that staffing needs will not be settled until later in the summer, when the plan for the next school year is finalized. 

To deal with this uncertainty, Town staff prepared three scenarios labeled “Bad, Worse and Worst”, that plan for a shortfall of state aid from 10 to 20 percent and projected town budget deficits of $3.6, $4.4, or $7.7 million dollars, depending on whether the coronavirus pandemic ends in September 2020, January 1, 2021 or at the end of FY 2021. And the impacts of these stressors will be felt at least into 2022 and 2023, impacting Town reserves and capital plans.

The proposed 2021 budget, presented in more detail at the Finance Committee meeting on May 12, assumes the middle scenario ($4.4 million deficit) and a 15 percent reduction in state aid. To balance the budget, property taxes are raised by the allowable 2.5 percent, and all departments are level funded, which would, in essence, be a reduction in services. Also, contributions to other post-employment benefits (OPEB) are reduced by half, to $250,000, and the capital budget is decreased by $2.5 million. A comparison between the pre-COVID proposed budget and the current proposal can be viewed here. 

Bockelman stated that the staff has been in close communication with state agencies and other towns. All municipalities are facing the same uncertainties and shortfalls, and all will have to comply with the same regulations governing the reopening of businesses and services. With regard to capital expenditures, Councilor Cathy Schoen (District 1), Chair of the Joint Capital Planning Committee, said that the Committee has yet to meet, but will consider funding only the most urgent projects. Councilor Dorothy Pam (District 3) said she hopes work to improve the Town’s streets and sidewalks would continue.

Library Trustee Austin Sarat stated that he hopes the Town does not stop all needed capital projects since low-interest loan rates might make this an ideal time to borrow money. Trustee Alex Lefebvre said she was thinking of the magnitude of making the libraries and schools safe for social distancing. Superintendent of Schools Mike Morris said that Amherst has a health grant and is learning from other countries how to manage building entrances, class sizes, and handwashing stations. Councilor Steve Schreiber (District 4) said we should examine future building designs in light of preparedness for current and future pandemics. Pam suggested that Amherst might need to re-do the library grant and the preliminary plans for a new school, as past designs might not be suitable for the future. 

Councilor Alissa Brewer (at large) said she wants to make sure that employees with health risk factors are accommodated. Councilor Darcy DuMont (District 5) wants the Town to stay cognizant of its climate resilience goals during this period.

Several members of the Finance Committee wanted assurance that the Town will keep close track of revenue and expenses in FY 21 and will be willing to adjust the budget if either varies greatly from the projections. Funding for teacher salaries must be set by June 16, so the Town and libraries might have to bear more of the cuts. 

Proposed budgets for the libraries and schools are due to the Finance Committee by June 1. The full Council will discuss the budget at a June meeting. 

The next meeting of the Finance Committee will be set by Chairperson Councilor Andy Steinberg (at large). 

No public comment was accepted at the Special Meeting of the Council, School Committee, and Library Trustees. The Finance Committee did allow for public comment, but no one offered any comments.