Coronavirus Financial Plan


Impact on Revenues

Revenues are reduced.

Because of reduced travel, shopping, tourism and building, our sales taxes, hotel taxes, fees, fines licenses...will all be reduced as well. As our businesses see a reduced number of customers, their profits will go down which will also directly impact the taxes we bring in from them.

The best scenario is containment by March.

The chart to the right highlights revenue streams that could have a significant impact as the Coronavirus outbreak worsens. While, our biggest source of revenue, Property Tax, will likely remain stable for the next year, it too could see a drop as the other economic factors impact the housing market.

Impact on Resources

Our resources will be stretched.

The City health and public safety departments are working around the clock to deliver services that will help contain, diagnose and treat the coronavirus. This will impact personnel costs directly, with overtime, sick leave and healthcare expected to be at their highest levels over the next 3 months.

Financial Assets

Forecasting the financial impact of the Coronavirus this year.

Looking at our quarterly analysis, we are not projecting to have a significant impact on the budget until Q2, and at that point we may well have to look at using reserves to cover the costs associated with the Coronavirus. However, we also anticipate both Federal and State Aid which may offset the need to hit reserves this year. More on that below.

Community Impacts

Our community continues to see an increase in domestic violence incidents, unemployment claims and substantial loss in business revenues. We may want to think about a local stimulus package giving small businesses and individuals grants.

Long Term Impacts

We looked at several scenarios developed by Morgan Stanley as the baseline for our own analysis. While it is looking more likely that Scenario 2 is going to happen, we still must plan for the worst case Scenario (3) and prepare for things like Reduction in Force, Furloughs, Reduction in Reserves, and Reduction OPEB Funding.

Scenario 1 - Containment by June

Economic Scenario: Disruption to the first quarter of 2020 is limited as the virus outbreak is contained by March and production activity in China stabilizes mid-to-late March. Global growth dips to 2.5% in the first quarter from 2.9% at the end of 2019, but recovers "meaningfully" from the second quarter. US GDP weakens relative to current tracking of 1.7% but recovers in the second quarter.

Market Implications: Demand shock is written off by companies and consumers in the first quarter, and focus is put on earnings growth in the second quarter and beyond.

"We would expect rates move higher in tandem with PE multiples as equity risk premium compresses off of elevated levels," Wilson wrote. Morgan Stanley's bull case is S&P 500 to 3,250.

Scenario 2 - Disruption Extends into 3rd Quarter

Economic Scenario: Disruption extends in the second quarter as new cases rise and peak by the end of May. Global growth averages 2.4% in the first half of 2020, but picks up in the third quarter. US GDP stalls in the first half of 2020 before recovering.

Market Implications: This is increasingly looking like the most plausible of the 3 scenarios and the state of the world the market may remain in longest - something of a limbo between a bear case and a more bullish state with higher confidence on improving outlook.

Impacts to consumer behavior and global growth arrest the recovery at large companies, revenues decline and earnings growth for the full year comes in near 0%.

Scenario 3 - Persisting into 4th Quarter

Economic Scenario: The virus continues to spread and encompasses all large economies, bringing the risk of damage to corporate profitability and a rise in corporate credit risks. US GDP average is close to 0% growth in the first half of 2020.

Market Implications: Whether or not a technical recession occurs, this scenario will be treated as a recession.

Flat GDP growth will remove any expectation of a return in operating leverage as revenue growth evaporates. We would expect multiple quarters of negative earnings growth, with the biggest issues in highly cyclical, high fixed-costs businesses and highly valued structural growth areas, which are perceived to have less cyclical risk, according to the note.

Projected Revenues Based on Planned Scenarios

Projected Expenses Based on Planned Scenarios

Specific Program Level Impacts

It is safe to assume that our major programs in Health, Public Safety and Transportation will be impacted by the Coronavirus. Additionally funding will be needed in these areas to deal with the crisis.

The chart to the right (and underlying report) highlight the program areas we anticipate will have the greatest need for additional funding.We have projected what these costs will look like for 2020 as compared to this years budget.

CARES Act - Help is on the Way

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020. This over $2 trillion economic relief package delivers on the Trump Administration’s commitment to protecting the American people from the public health and economic impacts of COVID-19.

The CARES Act provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries.