City councilors on Thursday got their first look at a proposed plan to address a projected $1.3 million shortfall in general fund revenue, which is expected to take a hit from a drop in consumer spending as a result of the COVID-19 pandemic.
City Manager Mike Miller said the anticipated 10% decline in sales tax revenue can be filled with a withdrawal of up to $600,000 from emergency reserves and holding down costs. The plan includes "no furloughs, no layoffs and limited operational services" provided by the city.
"This allows us to hold steady while we see what the future holds," Miller said. "We are not making any drastic cuts, we are not making any knee-jerk reactions, we are letting the reserves cover the emergency shortfall, allowing us to not make any rash decisions."
While revenue from the capital improvements sales tax is expected to decline, Miller said planned financing for a $24 million streets improvement program would allow those projects to move forward as scheduled. The temporary sales tax approved in 2019 by voters is expected to generate $12 million during a six-year period, and the City of Muskogee Foundation pledged matching funds up to that amount.
Some of the city's partners that benefit from annual funding would experience cuts if all of the elements included in the plan are adopted as part of next year's budget. The Muskogee City-County Port Authority would take a $100,000 cut for its industrial development contract, and Main Street Muskogee plans to decline funding of $80,000 as it "retools" during the coming year.
Tourism stands to take the biggest hit with a projected 60% decline in revenue generated by the municipal lodging tax. The lodging tax generated $977,000 for tourism development this year, but Miller's proposal is based on projected revenue from that source totaling $366,000.
Even with projected revenue declining more than half, those actively engaged in Muskogee's tourism development efforts cautioned against cuts to entities that rely on annual appropriations.
Justin O'Neal, tourism director at the Greater Muskogee Area Chamber of Commerce, said data show there is an increase in traveling, with motorists willing to drive up to 500 miles to reach a destination. He said that demographic is a target market for local tourism and with events such as fishing and golf tournaments scheduled this summer, he expects "some growth right now" in local tourism.
Civic Center General Manager John Cruz said there are signs that "people want to be out of their houses," and "they want something to do." He said while there is still a need "to be mindful about the virus," present economic conditions could "be a good opportunity for Muskogee" tourism.
"Let's take a look at this and make sure our attractions are funded and able to remain open," Cruz said. "People are more willing to get in the car now and drive away. We need to consider this may be a good opportunity for Muskogee."
While Miller's plan includes cuts in the amount the city spent last year to promote events, it would preserve funding for Oklahoma Music Hall of Fame, Batfish War Memorial and Three Rivers Museum, which would get a slight increase. Appropriations for Roxy Theater would come from the general fund rather than tourism, but the amount available for the tourism contract would be cut from $600,000 to $150,000. The chamber, which holds the contract, would be allowed to keep carryover funds that amount to about $200,000.
The goal of the budget proposal for tourism, Miller said, is "to keep our attractions afloat."
Miller said Muskogee is better positioned than many municipalities because of steps taken by city councilors during the past few years. Those steps included the implementation of a savings plan that fattened the city's emergency reserves from about 10.4% of the general fund value in 2018 to a minimum value of 20% and an optimum amount totaling 30% of the general fund value.
The proposed expenditure of up to $600,000 from emergency reserves to supplement revenue for the fiscal year 2021 budget, Miller said, represents about 10% of the city's emergency reserves.
"It's been a lot of hard work — none of it's easy," Miller said about crafting the budget proposal. "There's a lot of stuff in the budget I don't like, that I wish we were doing different, but this is the best we can do given where we are right now."
State law requires two public hearings be convened before city councilors adopt a budget for fiscal year 2021, which begins July 1. Those hearings are expected to take place during councilors' upcoming meetings on June 1 and June 8.