“I don't think anyone realizes the ramifications of this situation and it's going to take time to see how this goes,” said Westlake Mayor Dennis Clough.
“We know we're going to get hit pretty hard. We have a lot of small businesses in Westlake and some large companies have furloughed or put their people on call.”
The mayor suggested that income tax revenue might be down 25-29% this year because the city has so many small businesses and it is still unknown how fast, or if, they will recover.
Also, income tax filing and payments have been delayed by three months to July 15. So in addition to the delay in collecting the taxes, there is a potential that taxpayers who delay their payments may need to repurpose those tax funds for more urgent needs, according to Finance Director Prashant Shah. As a result, the city expects delinquencies may be up. Delinquencies may also crop up in real estate tax payments, Shah said in an email.
It could get even worse, according to the mayor, because a provision in tax laws allows companies projecting losses for this year to amend their returns for the three previous years to account for those losses. That could mean the city will be required to repay those companies for taxes paid for those years.
“We're going to have to be cautious about what projects we do this year,” Clough said. As examples, vehicles and equipment will not be replaced unless it's an emergency. “We're going to get an extra year out of police cars and trucks.” Replacement of playground equipment is on hold. Travel is nixed unless it is for mandatory training.
The city's directors have been told to trim budgets. “We are evaluating the situation on a weekly basis and will adjust our target as the picture gets clearer,” Shah said.
The new 28,000-square-foot senior-community center under construction may be completed slightly ahead of schedule. However, other infrastructure projects, including a waterline project and the resurfacing of Hilliard Boulevard. may have to wait. Plans to redesign the city's Meadowood Golf Course may be put on hold, even though an architect has been hired for the project. “We will be reviewing anything not under contract,” the mayor said.
Clough said he's seen down cycles before, but nothing like this. He believes the country is already in a recession. “It's my own sense we are teetering on a depression because I don't know just how fast we can get back to work such huge numbers of unemployed.”
He said an economic rebound is based on people feeling confident about the future. “That's what drives spending,” said the mayor, who is an accountant by training. “Otherwise, people are going to be hesitant to spend.”
Shah echoed a similar sentiment. “Even when things open up for businesses, the question is will there be enough demand for the products since people will not have the same spending capacity as before due to layoffs and furloughs. If the demand isn’t there, then will the companies bring back full staffing?”
“I'd like to believe the economy is wanting to roar back, but there's a lot of constraints to determine if it really can,” the mayor said, adding “I want to be optimistic because we have a great county and city, so I'm hoping for the best but being cautious.”
The mayor provided the following responses to a West Life questionnaire about municipal finances:
Is your community considering any personnel furloughs or lay offs? Not yet.
Do you have a hiring freeze in place? We're not replacing anyone who's retiring. That includes five since the beginning of March.
Will summer recreation/pool help be hired this year? Unsure whether we will be able to open, so hiring is far behind what it should be.
If you are hiring for any positions, what are they? (see above)
Are you cutting or terminating any programs? Which ones? For what duration? Recreation and senior programs are suspended for now, except the senior meals program.
Have you gone forward or halted building projects or renovations? Please elaborate. The
senior/community center is under construction and we will get it done. We're going to have to be cautious about what projects we do this year. We will do those already contracted.
How much was the community's income and net profit tax tax revenue down in March compared to March 2019? Total income tax collections for the first four months is slightly up, 2.9% over last year. May is not looking good at all.
Have other revenue streams been impacted? Which ones? What is the anticipated aggregate amount of this loss for 2020? We've lost quite a bit of revenue from the rec center closure and refunds for canceled programs. Other taxes such as hotel motel taxes and admissions fees will also take a hit. The state is predicting a reduction in gasoline taxes as well due to the drastic reduction in commuting for work and pleasure.
What cuts to the budget will be made other than personnel and services? We've continued all our basic services. We can withstand some of the downturn, but, on the other hand, we cannot keep all the services if revenue is going down 25-29%.