Sunday, May 31, 2020

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Moab, UT

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    City looks at grim economic future

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    Doug McMurdo
    Doug McMurdo
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    Outlook goes from bad to worse

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    If not for a global pandemic that brought the civilized world to its knees a few weeks ago, the City of Moab’s financial situation heading into the next fiscal year beginning July 1 would have been in fairly good shape.

    An April 1 review of the city’s tentative budget reveals there’s $9 million in sales tax revenue augmented by $4.9 million in utility fees — that could go only towards operations — and recreation user fees of about $683,000.

    The bottom line that existed prior to COVID-19 was “good news,” according to Rachel Stenta, the city’s finance officer who is now the business administrator at Grand County School District. Stenta, who will consult with the city as it wrestles with the devastating financial fallout of COVID-19, said funds were balanced and the general and other funds were healthy enough to have contributed tens of thousands of dollars — more than $400,000 — to reserves.

    The tourist season began on a high note, with local overnight lodging firms logging an occupancy rate of 90 percent the second weekend of March and then — poof — COVID-19 made them all disappear, and with them any chance Moab, Grand County, and likely the world at large would avoid a deep recession.

    How deep it cuts into the city depends on how quickly the travel restrictions and closures are eased and whether or not tourists decide to spend their vacations here or somewhere else.

    How do we plan for the unknown?

    Financial planning during crises such as what is currently occurring is a science. Stenta mentioned the rocky start to the 21st century when the terror attacks on Sept. 11, 2001 brought the economy to a crashing halt. The dot-com tech crash in 2002 dealt another powerful blow to the economy and in 2003 the SARS outbreak — like COVID-19 only far less virulent and deadly — all created recessions.

    None of them compared to what has become known as the Great Recession in 2008-2010. And how could we forget the Zika Virus that stopped travelers in their tracks in 2017?

    And while those recessions came and went, the number of tourists who came to Moab steadily climbed with passive dips along the way. It climbed more in some years than others, but the climb was almost continuously upwards.

    Recessions difficult to endure

    To be clear, all of those recessions were difficult to endure, some more than others, but none of them brought a total and abrupt halt to any tourism traffic whatsoever as has happened with this novel coronavirus.

    The sales and transient room taxes the city collects in March and April is collected in May and June, respectively, as there is typically a two-month lag. March and April are two of the largest tax collection months on the calendar for Moab.

    Without sufficient information to develop a revised financial plan with any degree of certainty, Stenta told Mayor Emily Niehaus and the city council that the best she could do is provide a roadmap, or “a path forward.”

    “COVID completely rearranged what we thought we knew,” she said.

    She suggested the city look at the potential ranges of shortfalls it could face based on recent history. She also suggested they could attempt to project revenue shortfalls based on a range of between 4 percent and more than 20 percent.

    Steps have been taken. A hiring freeze has been in place since January and a spending freeze for all but essential items was recently imposed. More than 80 part-time employees and two full-timers have been laid off or furloughed.

    Still, everything depends on how long the virus keeps doors locked and shops and restaurants empty.

    Possible cuts

    Possible cuts include more than $700,000 by prohibiting overtime, closing down special projects and eliminating travel.

    Deferring capital projects, renegotiating or deferring interlocal agreements, and refinancing roughly $14 million in debt are other potential responses to what could be a painful recession.

    City Manager Joel Linares is looking at it optimistically, saying the city will have a better idea of where its financial footing is by June. Already at risk of losing $1.5 million in total sales and TRT tax, he said people might come to Moab in droves in the hotter months, when tourism slows down a bit ahead of the fall rush.

    In the meantime, city staff will prepare to see what it can get from the $1.5 billion Utah is expected to receive as part of the coronavirus relief legislation known as the CARES Act.

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