City of Birmingham Facing ‘Economic Crisis’ Over Falling Revenue From Pandemic

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Sam Prickett, BirminghamWatch

Birmingham can expect an $18.3 million budgetary shortfall for the 2020 fiscal year because of the pandemic, Finance Director Lester Smith told the City Council Tuesday. And he warned that the economic impact on the city’s FY 2021 budget could be nearly four times that.

Mayor Randall Woodfin, calling the situation an “economic crisis,” said that the dip in revenue means “painful” budget cuts are likely on the way.

The COVID-19 pandemic and the city’s subsequent “shelter-in-place” order led to a significant drop in business tax revenue for the city, Smith said. That revenue, which includes sales, use and occupational taxes, typically accounts for 81.3% of the city’s overall budget.

Business taxes collected in April and May 2020 dropped approximately 20% from the previous year, Smith said, adding that the citywide curfew instituted for the first week of June will likely lead to further losses.

Mayor Randall Woodfin called the city’s financial situation a “crisis” that would result in significant cuts to the FY 2021 budget. The city currently projects a loss of $73 million for FY 2021, which Woodfin said meant that the city will have to make “painful” budget cuts.

Woodfin said he would attempt to distribute the cuts evenly among employees, departments, city services and boards and agencies.

“They all will receive some form of a pinch,” he said. “We have to equally share this pain.” Though Woodfin was reluctant to share specific ideas for what could be cut, he suggested that budget discussions would involve “the things we take for granted, like picking up trash twice a week and all these other city services.”

Woodfin’s office had originally planned to present a proposed budget to the City Council last month — the fiscal year begins July 1 — but Woodfin announced instead that he would delay doing so for 90 days due to the unpredictable economic impact of COVID-19. Woodfin told the council Tuesday that budget negotiations would likely begin in earnest next month with the goal of approving the final budget by October 1.

Smith said that while his office was considering using some money from the city’s $75 million “rainy day” fund, he was reluctant to encourage that idea, saying it was “not the number-one item on our list for how to resolve this situation.”

“My question to the council is, how long did it take you to accumulate that balance?” he asked. “That’s really all you have left in savings … You need to be very aware and careful of how you spend that funding.”

In response to a question from District 5 Councilor Darrell O’Quinn, Woodfin said the city would likely not shut down again, even as COVID-19 numbers continue to rise in Alabama.

“Every decision we made was through the lens of, ‘We have to save lives,’” Woodfin said. “We needed to be bold, we needed to be decisive, and that had a benefit in the sense that overall, we did that, right? We saved lives. But that had a financial, negative cost to our local economy, to the state’s economy, to our national economy… The community will push back against [another shutdown]. People will literally just fall over and be pushed to the edge where they will never be able to recover… We have to strike a balance at this point between saving lives and saving livelihoods.”