We have become accustomed to seeing our national and state political leaders in the media discussing how to stay safe during the coronavirus pandemic. We all feel it as employers are forced to close their doors and our paychecks dry up. In light of this, municipalities should be tightening their financial belts. The Mayor of Wood River should be showing strong financial leadership.
As a CPA and forensic auditor, I am monitoring the city’s fiscal health to determine how well we will weather the pending economic storms. By the end of the fiscal year on April 30th, Wood River’s general fund cash is projected to drop from $1.9 to $1.6 million, putting their rainy-day cash reserves at two and half months of expenditures. The city’s cash “lean” budgeting is beginning to look more like a “just-in-time” approach to cash reserves. This is proving to be problematic now that businesses will be able to delay payment of sales tax, which the city depends on, until after July 15th. This would delay up to $1.5 million in cash payments to the city. The math is simple, $1.6 million in cash reserves minus $1.5 million in suspended cash payments would leave $100,000 in cash reserves. The city can’t afford another bump in the road.
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It’s safe to assume the city’s revenue streams will fall. Sales tax, representing approximately 60% of tax revenue for the general fund, will suffer. Preliminary estimates from the Commission on Government Forecasting and Accountability are suggesting a 20% decline in revenues, which would mean about $1 million in lost revenues for the city. Additionally, The current proposed budget already outspends pre-coronavirus revenue projections.
Highlighting problems is easy, but we all want positive solutions. First, the city is in final stages of passing their budget. They should make adjustments by revising projected revenues and adjusting planned expenditures accordingly. Second, the city should immediately implement plans to increase general fund cash reserves to six months of expenditures. Not easy; but possible when considering the city’s proposed budget includes $3 million in capital projects.
Wood River projects $1.4 million in annual revenues from the 2019 sales tax increase. In the proposed budget, the city council is currently allocating all sales tax revenues for capital spending. This should be reassessed. All discretionary capital spending should be suspended, with exceptions only for necessary public safety and for those that maintain the enterprise funds’ operations.
No one wants to see well-intentioned discretionary capital projects delayed. However, economic uncertainty requires Wood River leaders to shore up the balance sheet so the city can survive the pending revenue shortfalls.
Wood River is our home, and we need it to remain economically strong. No one could foresee the damage a virus could do to our municipal finances, but it’s in chaos and uncertainty when local leaders can emerge and guide our city into a promising, more secure future.
Jeremy Plank is a Wood River resident, Certified Public Accountant, and Principal of Forensic Accounting and Consulting Services.
Opinions expressed in this section are solely those of the individual authors and do not represent the views of RiverBender.com or its affiliates. We provide a platform for community voices, but the responsibility for opinions rests with their authors.
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