goskagit

BURLINGTON — The COVID-19 pandemic is taking a toll on the city of Burlington’s finances, adding to previous struggles with the city’s 2020 budget.

At a virtual City Council meeting Thursday, staff and elected officials reviewed the damage to city finances caused by the pandemic, and discussed ways to further cut costs or increase taxes.

Greg Young, interim city administrator, said early calculations indicate the city could lose $1.5 million to $3 million in revenue in 2020.

With its heavy reliance on sales tax, the city is particularly vulnerable to a dip in business. Young said preliminary numbers for March show a 35% drop in sales tax revenue, and businesses were only shut down late in the month.

Even before the pandemic, the council struggled to reach agreement on a 2020 budget, and Young said at that time an additional $1.5 million — in revenue or cuts — would be needed to balance the budget in 2021.

The council met repeatedly in late 2019 and early 2020, attempting to reach an agreement on new taxes and spending cuts in order to balance the 2020 budget.

In December, the council approved a budget that, while technically balanced, included a 5% cut across the board, and drastic cuts to the street maintenance fund. At the time, council members said they would meet again soon to vote on new Business and Occupation taxes and utility taxes, but the votes have not yet been held.

Young said he plans to bring the new taxes up to the council for a vote soon.

At Thursday’s meeting, council members discussed how they thought the city could address the projected shortfall.

James Stavig and Joe Degloria called for significant cuts and limited or no new taxes, with a focus on only essential government services — “Police, fire, streets and sewer,” Stavig said.

Keith Chaplin and Bill Aslett said they would consider having the city keep a larger reserve fund for emergencies such as this.

Mayor Steve Sexton said the city’s reserve fund is about 20% of operations for one year, greater than its goal of 15%. However, he said the city might want to consider a larger reserve, due to the city’s significant reliance on sales tax.

Young said a large reserve would be prudent if it were possible, but said that would mean significant sacrifices for the city.

“I’m concerned with the dramatic cut to services that that would entail,” he said.

Sexton said the state Legislature is planning to meet for a special session later in the year, and that it may pass legislation allowing cities easier access to their restricted funds.

This means cities may be allowed to temporarily use money reserved for things such as construction projects or infrastructure improvements to replace missing revenue, he said.

On the topic of infrastructure, Chaplin said large projects within the city should be on hold for the foreseeable future, even if it means losing grants from the state or federal governments.

New streets may be subsidized by grant money, he said, but maintenance isn’t. Construction brings ongoing costs to the city, he said.

Aslett, however, said in some cases it makes more financial sense to go ahead with projects, even if it costs the city money up front.

He cited the East-West Connector project, which would add a new road off Burlington Boulevard near Costco and opening up a large section of Burlington to commercial development. Millions in grant funding has already been acquired.

“We’re paying $150,000 for a $10 million project,” Aslett said, adding that about half that is in building materials, for which the city gets sales tax revenue.

Construction and new business both create jobs, growth and additional tax revenue, he said.

“Businesses pay more in taxes than they cost to maintain,” he said.

— Reporter Brandon Stone: bstone@skagitpublishing.com, 360-416-2112, Twitter: @Brandon_SVH