Wednesday, May 20, 2020 | 6 p.m.
The Las Vegas City Council on Wednesday unanimously approved a dramatically scaled-back budget for the fiscal year starting July 1 with cuts far deeper than those made during the Great Recession.
The city’s total FY21 budget, including revenue from special funds, amounts to $1.5 billion — $200 million less than the estimated actual budget for the current fiscal year, despite that the city’s population has increased by an estimated 90,000 people between this year and last year.
“Typically, the budgets go up. This year, the budget is going down,” Chief Financial Officer Gary Ameling said.
The budget reduction is almost exclusively due to drops in revenue associated with the COVID-19 pandemic and the resulting state-mandated closures of most nonessential businesses since mid-March. The fiscal impacts of the pandemic forced the city to rapidly cut a combined $150 million from its FY21 budget and from the last several months of its current budget, which ends June 30, said City Manager Scott Adams.
“Even the Great Recession budget cuts we experienced paled in comparison to the budget cuts we are presenting to you today,” Adams said.
The largest portion of the city’s annual budget comes from its general fund: a pool of money funded by the consolidated tax, property tax, license and franchise fees, fines and service charges. Because of coronavirus’ fiscal impacts, the FY21 general fund budget is $571.8 million — $123.8 million less than what the city projected it would be in January.
This is the first time since Ameling was hired in 2017 that the consolidated tax will account for less than 50% of the general fund revenue, he said. The consolidated tax, which primarily comes from sales tax in Nevada, will represent just 42.9% of the general fund revenue for FY21.
Several factors helped the city balance its budget over the last few months and avoid a worst-case scenario: running out of reserve money sometime next fiscal year, Ameling said. The city implemented a hiring freeze, furloughed nonessential employees and had departments submit proposed reductions as part of the budget process, he said.
Officials are working with employee unions to reach agreements on personnel cuts. The city plans to spend $14.4 million less on employee wages and benefits in the upcoming fiscal year as compared to the current one and will cut staff by about 2.8%.
“It has always been our approach to make layoffs a last recourse,” Ameling said.
The $118.9 million the city received through the CARES Act, the federal coronavirus relief bill, also helped balance the budget. The money will go primarily toward maintaining city operations, particularly in the areas of public safety and services directly related to coronavirus, Ameling said.
The CARES money is significant, but not enough to avoid cuts to personnel, services and capital improvement projects, Adams said.
“That still doesn’t get the whole job done,” he said.
The long-term impacts of the pandemic on municipal spending could be significant. While officials don’t know by what year the budget will return to precoronavirus levels, they expect deficits to persist until fiscal year 2026.
In FY21, the only major funding source that won’t be reduced is property tax revenue, which is based on an assessment from Jan. 1. From FY20 to FY21, property tax revenue will increase by 4.2%, Ameling said. However, the city projects that property tax funding increases will flatten out in the coming years, he said.
When determining what to cut from different services and departments, the city considered restrictions on certain funding sources and “critical needs,” such as urgent capital improvement projects, said Jorge Cervantes, chief operations and development officer for the city. Officials also looked to priorities set by the council, including public safety and parks and recreation funding, Adams said last month.
In addition to approving the budget, the council unanimously approved the creation of a fiscal stabilization fund. The fund, which will be supported by a few initial sources and 0.1% of all property tax revenue coming into the city, will help stabilize operations during future economic downturns and natural disasters.
The council also approved the creation of a fund to support a customer service and payment center created during the pandemic. It serves as a centralized location where residents can obtain information and make payments to the city.
