The city of Monroe’s finances could take a dive because of lost sales tax collections of some $3.6 million to $10.8 million thanks to the COVID-19 crisis, the state auditor says.
The projections of lost revenues were based on worst case and best case scenarios presented in the “Effect of COVID-19 on Local Government Revenues” report. The report was released May 7 by State Legislative Auditor Daryl Purpera.
Copies of the auditor’s reports are available online at www.ouachitacitizen.com
Following a news conference on Tuesday, Monroe Mayor Jamie Mayo expressed skepticism of the auditor’s projections.
“Well, first off, it’s not going to be nearly $11 million,” Mayo said. “Nobody knows for sure what those numbers will be.”
Mayo referred to previous internal projections that estimated the city’s sales tax collections in March would drop by 25 percent. Those projections turned out to be incorrect, he said. The city’s sales tax collections dropped by 11.9 percent.
“We’ve lost a lot of sales taxes, but we’ve saved a lot of lives, too,” said Mayo, referring to the stay-at-home order and other social distancing restrictions.
The auditor’s report detailed scenarios for each governing entity in three categories: average, optimistic and pessimistic.
In the pessimistic scenario, the city of Monroe could lose some $3.6 million in sales tax collections in 2020 and some $7.2 million in sales tax collections in 2021, for a total of some $10.8 million.
“The pessimistic scenario assumes a severe initial economic contraction and a slow recovery to the economy’s former growth trajectory,” stated the report.
In the optimistic scenario, the city’s sales tax collections could drop by some $2 million in 2020 and some $1.6 million in 2021, for a total loss of some $3.6 million.
“The optimistic scenario assumes a less severe initial contraction and a full recovery by the second quarter of calendar year 2021,” stated the report.
An average of the two scenarios estimated the city’s lost sales tax collections could reach $2.9 million in 2020 and $4.6 million in 2021, for a total loss of some $7.5 million.
Earlier this year, Mayo announced the city would post a $600,000 surplus for the 2019-2020 fiscal year that ended April 30. Last month, amid the COVID-19 crisis, Mayo delivered bad news: the city would likely post a general fund deficit of some $1 million, indicating a total loss of some $1.6 million in recent months.
When asked about the auditor’s projections, Mayo defended his administration’s efforts to manage the city’s finances.
“We’re not new to this,” Mayo said. “Our fiscal team stays on top of this.”
Mayo noted the city had just commenced its new fiscal year for 2020-2021 on May 1, meaning the city could reduce expenditures ahead of projected losses instead of enduring unexpected revenue losses as it did when the crisis began in March.
One upcoming cut to expenditures would be the suspension of the city’s summer youth program, during which the city normally hires a couple hundred youth to perform work over the summer.
“We’re not having that,” Mayo said.
Unlike Monroe, other governing entities like the parish and city of West Monroe had reviewed the auditor’s report and used its estimates to prepare for a gloomy financial future.
According to the auditor’s report, the city of West Monroe could lose $700,000 in an optimistic scenario or some $2.7 million in a worst case scenario. An average of the scenarios could mean a loss of $1.7 million in revenues for the city, the report stated.
Earlier this month, West Monroe Mayor Staci Mitchell said her administration was seeking to be “very conservative in our budgeting.”
Courtney Hornsby, Mitchell’s chief of staff, confirmed that the city’s finance director, Scott Olvey, had reviewed the auditor’s report prior to preparing the city’s 2020-2021 budget.
“He said the report provided good data and that data was taken into consideration when making budget estimations for the city,” Hornsby said. “Our estimates fall between the legislative auditor’s best and worst-case scenarios.”
According to the report, the Ouachita Parish Police Jury could lose anywhere from $1.4 million to $4.3 million.
“We really don’t know,” said parish treasurer Brad Cammack. “It could be more.”
During discussion of an off-road drainage project on Monday evening, Police Jury Vice President Jack Clampit asked his colleagues to apply the brakes to tackling new projects until more information was available about the crisis’ financial effects.
Between the Police Jury’s general fund and public works fund, the parish governing authority was expecting revenues to drop off by at least $2 million, possibly more, Clampit said.
Governing entities like West Monroe and the Ouachita Parish Sheriff’s Office have reiterated statements that public services would not be disrupted in spite of any fiscal troubles arising out of the COVID-19 crisis.
The Sheriff’s Office could lose anywhere from $600,000 to $2.2 million, according to the auditor’s report.
Chief Deputy Marc Mashaw noted the COVID-19 crisis had placed a strain on the department, financially as well as on its personnel.
“We do not plan to cut any services we provide to the public,” Mashaw said. “Based on current budget numbers, we do not foresee a deficit in our current year; however, we do currently have a budget surplus we could use should a deficit situation appear. We meet quarterly each year and discuss the budget and projections for the year. We will continue to do this moving forward each fiscal year to assure we are good stewards of the public’s money and continue to offer the best service possible to the citizens of Ouachita Parish.”
Purpera’s office estimated that parish governing authorities, municipalities, school boards and sheriffs would collectively lose some $404 million to $1 billion in tax revenues and mineral royalties during the 2020 and 2021 fiscal years.
“If COVID-19 makes a resurgence in the coming months and causes a decline in consumption either due to voluntary action by consumers or mandatory stay-at-home orders, this could have further negative impacts on local government beyond those considered in this report,” Purpera wrote.
Other local governing entities were included in the report. Sterlington could lose as much anywhere from $34,000 to $111,000, and the Monroe City School Board could lose anywhere from $1.3 million to $4.8 million. The Ouachita Parish School Board could lose $2.1 million to $7.8 million.