URBANA — Urbana’s finance director is urging the council to wait and see what the impact of COVID-19 will be, as the city has more than $10 million in reserves.
Elizabeth Hannan said at Monday’s council meeting that it’s a bit early to determine the financial hit of the pandemic.
“I really think our best strategy at the moment is just to wait and see,” she said. “We can do that because we have that health fund balance.”
Hannan recommended the city avoid new expenses until it’s clear there’s a recovery.
And she said economic recovery and development for businesses should be a priority, to help grow the tax base.
“We need to prioritize economic recovery for local businesses because that’s really what’s going to help us recover,” she said.
The city has spent the past few years cutting its budget and raising taxes, and before the pandemic hit, Hannan expected budget surpluses for the next five years.
The city’s financial forecast is projecting a deficit each year from fiscal 2021 to 2026.
“I don’t think I’ve ever before said we should spend down fund balance to buy time rather than making cuts,” Hannan said, “but I think for us that that probably makes sense right now.”
Hannan and Mayor Diane Marlin said that if more budget cuts were made, staff and services would need to be cut.
“If there’s ever a time when our residents and our businesses in our community needs the city to be there for them, it’s going to be over the next six months to one year,” Marlin said.
Hannan said that while it’s too early to say what the impact of COVID-19 will be, sales tax revenue has returned to levels from a year ago after a 20 percent drop.
Still, she said sales taxes only make up about a quarter of the city general fund’s revenue, while it used to be closer to a third, as more sales move online.
Asked about the effect of cannabis sales tax, Hannan said the city hasn’t yet received any, but expects to receive its first payment this month.
Hannan said the forecast accounts for cannabis sales tax and should help dampen an expected drop in revenue in fiscal 2021.the