Ashland finances are weathering COVID-19
The city of Ashland is well positioned to withstand financial impacts from the coronavirus pandemic and construct a sturdy bedrock for lasting durability, according to City Finance Director Melanie Purcell.
Purcell highlighted sound balances in most operating funds as indicative of success as far as use of the city’s financial tools through a difficult situation.
“The good news is, our revenues are still exceeding expenditures for the end of the fourth quarter, which I always consider an excellent place to start,” Purcell said during a City Council study session Monday.
Balances are either increasing or stable in the general and central services funds, which is where bond rating agencies typically look to determine overall budgetary health, she said. Enterprise funds are stable, with healthy capital balances queued up by scheduled projects.
However, fiscal year 2020 ended with a negative balance in the insurance fund — worthy of concern, Purcell said. Financial analysts are researching pending litigation against the city to determine whether redlining is an anomaly or the result of a structural problem.
Fourth-quarter food and beverage and transient occupancy taxes declined, though less severely than preliminary projections, making subtle service adjustments effective, she said. Still, the city estimates flat revenues through the end of the next biennium. A spike in lodging reservations following the Almeda fire does not represent a long-term offset for fiscal year 2020 fourth-quarter occupancy tax losses.
Ashland’s food and beverage tax collects 5% on all prepared food sold in the city. The transient occupancy tax collects 10% on hotel and motel stays.
Fiscal year 2021 first-quarter transient occupancy tax trends are erratic as a result of regional fire events — the spike will not last, as the 30-day taxable window for hotel occupancy has lapsed for those who have been staying at a hotel since September, Purcell said.
The food and beverage tax has been less volatile, with steady growth over a 10-year period until the dropoff in 2020.
All revenue sources declined compared to the first quarter of the fiscal year, apart from building and planning permit fees, electric users tax and franchise revenues. Purcell said flattened food and beverage revenue and filing delays impede developing a sound projection on the behavior of the revenue stream going forward.
Looking ahead, the 2021-2023 biennial budget will aim to further stabilize “a strong foundation for comprehensive and resilient strategic long-term planning over the next two years,” Purcell said in the report. “Recognizing the constrained revenue environment means that some difficult decisions will be made by the City Council as part of building that foundation.”
The city has left staff vacancies open, reduced material and supply costs and delayed capital projects in response to revenue shortfalls. Purcell said furlough days, seasonal staff position elimination and perpetual vacancies help, but do not represent sustainable structural change.
A total of $1.1 million in federal reimbursement through the Coronavirus Aid, Relief and Economic Security Act covered new sanitation stations, public facility cleaning and equipment, along with direct costs associated with staff leave time for suspected COVID-19 exposure and child care. Still, the city absorbed the brunt of staffing shortages as far as service delivery, while attempting to offset a drop in overall productivity.
Councilor Julie Akins noted the shutdown coming Wednesday may alter trends outlined in the report, specifically regarding the transient occupancy and food and beverage taxes.
“It is heading right smack into the middle of the retail season,” Purcell said of the two-week freeze Nov. 18 through Dec. 2. “I’m anticipating that we will stay low but we’re going to see a shift in behaviors.”
City Administrator Adam Hanks added the food and beverage tax includes things local consumers regularly access, such as coffee, not only sit-down restaurants. Staff are working to sub-categorize spending behavior to determine how much revenue is generated by tourist dollars versus local. He estimated a 40/60 split between the two, but the data is insufficient to say with certainty which direction it swings, he said.
Dramatic shifts in purchasing behavior do not necessarily translate to a total reduction in taxes collected through both sources, Purcell said. Generally, in tourist-fueled economies, locals come out when the tourists leave. She expects a flat trend until the second year of the next biennium, depending on unforeseen volatility brought by state-level decisions.
“We don’t know how many more shutdowns we’re going to go through, the severity of them, or what the next iteration of our lifestyle is going to be,” Purcell said.
Updated financial reports will be brought to City Council quarterly, as information becomes available, she said.
Contact Ashland Tidings reporter Allayana Darrow at firstname.lastname@example.org or 541-776-4497 and follow her on Twitter @AllayanaD.