NOTE: ARCHIVED ARTICLE FROM CITYOFCAMAS.US FROM DAY OF ITS ORIGINAL POSTING.
How is COVID-19 affecting our financial outlook? Listen to Mayor McDonnell and Chief Financial Officer Cathy Huber Nickerson discuss: https://youtu.be/WYW2UQmaI48
For more on the City of Camas's COVID-19 response, please visit https://www.cityofcamas.us/ourcommunity/covid-19.
SUMMARY:
CFO Cathy Huberson Nickerson has 32 years’ experience in local government finance, seven years at City of Camas. She has a bachelor’s and a master’s degree in Public Administration and is a Certified Government Financial Manager.
Mayor: Yesterday, Gov. Inslee announced a stay-at-home order. It will have huge financial impact on the city, small business owners, and the community at large.
Council has requested that we keep a two-month operational reserve. We’re at a four-month operational reserve. What does that mean?
Cathy: We’re in a unique position. We were able to almost double our fund balance due to the building and construction going on, our ability to attract new business, and most importantly, working with the management team to restructure how we do our budgets. The combination of all those things has put us in the position we are today, with four-months of reserves available, which is perfect timing for where we are with this crisis. We were planning for a soft recession, and luckily these reserves are where we need them today to weather this.
Mayor: Thank you! I appreciate you maintaining those reserves and being strategic. I know you’ve challenged the department heads to evaluate cuts as we enter into these uncertainties. But I think it’s safe to say we’re in the strongest financial situation we’ve been in, which is positive.
When we say, “operational reserves,” is that like having a saving account?
Cathy: Yes, it’s money in our main account, if you will. It’s a higher balance that we’re maintaining, just like you at home you would keep extra money in your account for those rainy days. A rainy day is upon us, and we have those funds available to us. It’s not like capital, which is restricted like a retirement fund.
Mayor: It's good to have a rainy-day fund! I know you’ve been in contact with the banks, assessing cash flow and credit. We have a $7 million credit limit currently. Things may change, but if we have immense expenses around EMS or overtime, can we use that?
Cathy: Yes, the $7 million is specifically for those times when we are waiting for money from that state, in a seasonal cashflow situation, or for these emergency situations.
Mayor: The stay-at-home order will have significant impacts on businesses, livelihoods, and more. What can we do to help? What info is out there? Where can small businesses get help?
Cathy: The Washington State of Association of Business had a conference call yesterday (3/23/2020), which had on it a number of state agencies that serve small businesses, such as as the Small Business Bureau, Employment Security, the Dept. of Labor & Industries, as well as the Dept of Commerce. They had a lot of options available that the state has come up with for assistance, but they’re also going to work with the U.S. federal government for additional opportunities and partner up to maximize them. Those state agencies are on our website as a resource for anyone who has questions: www.awb.org/1/?cid=731
Mayor: We’ll keep that up to date. We’re also documenting all our expenses related to COVID-19, so when there are resources or funds, we can quickly get them and take full advantage of that support.
When it comes to expenses, we’re managing those very closely. We have some big projects out there as well—specifically Brady Road and the Lake-Everettt roundabout. We’re evaluating things on a day-to-day basis. But from a financial standpoint, can we use that money somewhere else? How can we use and not use that money?
Cathy: Those are examples of funding tied to specific projects. For Brady Road, we received $6 million specifically for that project. It was applied for by the City to the State for Brady Road. Likewise, with the $3.3 Transportation Improvement Board money for the roundabout. The City was given a total of $9.3 for both projects that we don’t have to pay back, but they are specific to those projects. There was also a low-interest loan of 0.5% that can only be used for the roundabout project.
Mayor: So, those are specific loans and monies for these projects. We’re on hold right now as we consider what’s essential and nonessential, taking the lead from the State, adjusting, reviewing, and meeting on a daily basis. The finances are a big part, and we’re trying to be as frugal as possible going into very unknown times.
They are unprecedented times, and we’re not alone in this situation. The entire world is going to be dealing with different aspects of this. But I do believe we’re going into this as well as we could be, and we’re going to be evaluating on a daily and an hourly basis, and again I think – no, I know – that we WILL get through this. Sometimes it’s just maintaining that perspective.
I was talking to former Mayor Nan Henricksen over the weekend, and she reminded me that Camas went through the Spanish flu. Her father was four at the time. We’ve been through tough times before – we’ve had different recessions. We’ve had the recession of the ‘20s, and Camas was able to stay on top; the recession of the ‘70s; and 2008. We’ve been through challenging times. I think we’re going into this as well-prepared as we could be, and we’ll continue to evaluate and make the best decisions for the community as a whole.
Right now, I think it’s taking the lead from the state and ensuring we’re doing everything we can to lower this curve, to minimize this pandemic as much as we can. Because if we don’t, I believe the financial costs of it will be far more, and the costs to our community and to the people who are most vulnerable will be even more significant.
I appreciate everything you’re doing on daily basis and ensuring that we’re being smart as we can with our money. Anything else to add?
Cathy: Our staff is really pulling together and making sure that we’re available in creative ways so residents always have a resource and can get ahold of someone. We will be there to answer any questions people may have.
Mayor: We are operating differently, and I appreciate your team’s flexibility as we ensure that we do everything we can to protect the community while we maintain those social distances and stay at home. Thank you.
Think about mortgage defaults for a minute. Bill Ackman has already cashed in on this reality (https://observer.com/2020/03/hedge-fund-bill-ackman-profit-coronavirus-market-crash/), and if what we know about the usual timing of Ackman's forecasts are true, we could be staring down the barrel of a 2008 style mortgage meltdown in 90 days. Remember, when people stop paying their mortgage payments, their property taxes stop being escrowed- and ultimately become uncollectable until the property is finally dispossessed out of foreclosure.
If the market has already priced in a 30% reduction in the value of these credit portfolios, which is exactly how Ackman made a couple billion in the last few weeks, then is Camas just a few months away from the beginning of a massive contraction of property tax revenues? And would a mere 20% reduction in those revenues thrust the City of Camas instantaneously in to the red.?
I'd also like to know what happened with that $60k+ for 6 months PR consultant that was so urgently needed in our small town.
So the Mayor and the city is being frugal supposedly. Yet earlier this month, they agreed to award a contract for over $5 million (with an allowed 10% cost overrun of $500,000), to build a very expensive roundabout on Lake Rd. & Everett.
How is that being "frugal"?
During the City Council discussion regarding the roundabout contract earlier in March, it was mentioned that other roundabouts had cost $2.2 million each. While we the people will need to dig more into the details, it seems that rushing to approve a contract for over $5 million for a roundabout is not "frugal".
The Mayor asked the right initial question -- how will the Corona virus crisis and the "stay at home" order by Governor Inslee impact city revenues?
We know the state and local economy is slowing down considerably. The country just announced a record 3.3 million Americans filed for unemployment. Clearly, there will be reduced tax revenues coming into Camas coffers. Many of our city businesses are closed. Depending on how long the "stay at home" order remains in place, it would be logical to assume a 10-20% drop in planned revenues to the city for 2020, (one to two months). Reduced sales tax revenues. Reduced building permits. Perhaps reduced and/or delayed property tax receipts.
The Mayor says "we're on hold right now . . . " as far as spending. Are we?
A closer look at the Camas sources of "revenue" aka taxes, is warranted by citizens and the City Council. While we hope for the best and a quick economic turn around, there are many "experts" predicting this could go on well into summer. Being frugal would mean zero unnecessary expenditures other than police, fire, EMS, water, sewer & trash, and truly critical infrastructure.
Here's a question. What is the monthly cost of city operations, i.e. salaries, and utilities and rents/mortgages and bare essential costs?
How much would city revenues need to drop before we need to consider layoffs, either temporary (hopefully) or permanent?
Shouldn't the city stop it's job search for a 6-figure PR "communicator" the City Council authorized a few months ago? It makes no sense to spend faster right now when revenues are very uncertain. How about "pausing" the search for a city administrator & let the Mayor run things?
What other ideas do citizens have for the city to preserve our tax dollars? I welcome the discussion & ideas & input on this topic.