By JOHN HOWELL At best, the administration's revenue projections for the fiscal year starting July 1 are a best guess. "e;In another six months we'll really see what the economic impact of this [CODID-19] is,"e; Michael D'Amico, financial consultant to Mayor
At best, the administration’s revenue projections for the fiscal year starting July 1 are a best guess.
“In another six months we’ll really see what the economic impact of this [CODID-19] is,” Michael D’Amico, financial consultant to Mayor Joseph J. Solomon, said in an interview Thursday.
D’Amico said the city was on solid financial ground going into budget deliberations, with projections that property tax revenues would continue trends earlier this year and come in at about 99 percent of what was levied. Hotel and meal and beverage tax revenues were seen as trending upwards, as were revenues from airport car rentals and parking.
All of that changed on March 15, when the governor issued an executive order for non-essential businesses to close, asked for people to stay home and issued a ban on large group gatherings because of the coronavirus. Responding quickly, Solomon delayed the fourth quarter tax payment by a month to May 15 and postponed a tax sale for the non-payment of taxes. With people out of work and businesses closed, Solomon aimed to provide relief from the stress of paying taxes as well as sewer assessments and city utility bills.
That threw tax collection projections out the window.
D’Amico said it’s too early to know if by the end of the fiscal year plus the months of July and August, when late payments are still counted as collections for the prior year, the city will reach that 99 percent collection rate used in the budget.
Nonetheless, in drafting the $323.5 million budget for the upcoming year, the mayor and City Council went along with the 99 percent collection rate.
In calculating revenues from other sources, the administration factored in reductions based on the effects of the pandemic on the economy and left others unchanged.
D’Amico said he doesn’t have data on real estate transfer tax revenues, although there are reports that the virus has affected home sales. As property sales can take several months to complete and the virus has made it more difficult to complete sales because of office closures, D’Amico doesn’t expect to have a handle on those receipts for some time.
Warwick traditionally has the highest number of single-family home sales on a monthly basis according to reports released by the Rhode Island Association of Realtors. Single-family home sales in Warwick numbered 81 (the state total was 738), down from 105 for April of last year. The median price of a Warwick single-family home increased from $235,000 for April 2019 to $250,000 this April, according to the association.
“No matter how we view the numbers, we’re not able to answer the question of the day: What’s in store for the real estate market? The housing market is directly linked to the economy and until we know how the summer is going to play out, there’s no way to predict what lies ahead. Thankfully, we started the year with a strong start and plenty of pent-up demand so we’re hopeful that will resume quickly as the economy reopens,” Shannon Buss, 2020 president of the Rhode Island Association of Realtors, said in a statement.
On the other hand, seeing how the pandemic affected airline traffic, which would have a direct bearing on airport car rentals and parking revenues flowing to Warwick, D’Amico reduced the projected $2.4 million to $1.8 million. Other airport revenues, including a $500,000 payment for city police assistance and fire services, are “fixed” amounts, as is $780,000 from the EDC.
Prior to the pandemic, hotel and meal tax revenues were projected to exceed $5.2 million for FY2021. That was cut to $4.5 million.
D’Amico also talked about the FY2019 audit tallying city reserves at $31.6 million, the largest surplus in the city’s history. He emphasized that is a snapshot in time and not a picture of where the city is today. He didn’t offer estimates on where the surplus is today, but he did point out that that strong financial footing has allowed for the city to cope with the financial impacts of the pandemic.
The budget calls for a draw-down of $2.8 million from reserves. Reserves enabled the city to delay the tax collection cycle by a month without having to layoff personnel or seek short term financing to meet financial obligations. The new budget, however, eliminates 39 positions resulting in the loss of jobs for 38 personnel (one employee is retiring and that job won’t be refilled).
“Fortunately, we started from a strong base and that allows you to absorb some of the economic pain,” D’Amico said.
Yet the financial path ahead is filled with potholes.
As the General Assembly has not addressed the state budget, which now appears to be delayed to July, the city is left to guess on state aid. Assumptions have been plugged in on schools.
Meanwhile, D’Amico said the city is preparing to have the tax bills in the mail by late this month. The first quarterly payment is due July 15. But even issuing city tax bills is problematic. As of last week, it was unclear whether legislators will approve the next step in the phase out of the motor vehicle tax. Under the phase out plan, the state would make up the revenues lost by the city. Revenue projections are based on continuation of the program, but if it were delayed, the city would need to issue bills based on bills for the current fiscal year.