Park City projects sharp drop in tax revenues, more evidence of coronavirus’ financial toll
City Hall this week released projections showing municipal revenues are expected to drop sharply in the next fiscal year as the economic toll of the spread of the novel coronavirus widens, a forecast that will likely be worrisome to a broad swath of the community since the municipal numbers at some level rely on economic activity that occurs inside the city.
Budget staffers in a report drafted in anticipation of a Park City Council meeting on Thursday indicated revenue levels in the 2021 fiscal year, running from July 1, 2020 until June 30, 2021, are initially projected to result in a negative 21% variance from the forecast, at a minimum. The drop has led the staffers to project a shortfall in revenue of a minimum of upward of $8.6 million in that fiscal year. The $8.6 million does not include another $3.9 million shortfall in the current fiscal year.
The sales-tax forecast for the 12 months starting on July 1 is especially grim. City Hall forecasts the sales taxes to drop by 36% from what had been expected. The forecasted drop in sales taxes is especially important since the revenue stream is critical to the overall budget.
Sales taxes are also highly important to the overall community since the amount that is collected reflects business numbers. The sales-tax numbers essentially rise and fall with the amount of business conducted inside Park City. The projection of a sharp drop for the full fiscal year of 2021 essentially signals City Hall expects a lengthy economic hit.
Other revenue streams projected to drop in the next fiscal year include planning, building and engineering fees, recreation and Park City Ice Arena charges.
“Generally speaking, staff has assumed a very slow return of sales tax revenues as the impacts of COVID-19 decrease,” the report says. “A full return to average levels of sales tax revenues is not expected in fiscal year 2021.”
Mayor Andy Beerman and the City Council are starting what are expected to be the most difficult budget talks since the depths of the recession a decade ago. The shutdown of business late in the ski season as the sickness spread hurt the numbers in the current fiscal year, leaving the $3.9 million gap, while the budget forecasts illustrate concern about municipal revenues in the upcoming 12 months.
The summer-tourism season has already been impacted with the cancellation of the Park Silly Sunday Market and the Tour of Utah bicycling race. It is difficult to predict the impacts on the 2020-2021 ski season with the start still months away and numerous unknowns regarding the state of public health by then.
The budget talks are expected to focus on strategies to cover the gaps in revenues through options like reducing operational expenses, reducing personnel expenses and deferring capital projects.
Officials are considering an unorthodox budgeting process that will result in the implementation of a provisional budget for the next fiscal year followed by more discussions and possible adjustments and re-adoption later in the fiscal year as the impacts of the illness are understood with more certainty. Park City Manager Matt Dias said the budget is anticipated to be revisited within 60 to 90 days after July 1, once revenue projections are more certain.
The City Council meeting is scheduled to start at 4 p.m. on Thursday. The meeting will be held electronically on the municipal website, parkcity.org.
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