Trustees Examine COVID Impact on the Village Budget

The Village could be forced to shelve plans for a flood mitigation project due to shortfalls in the budget from the COVID crisis.When the COVID crisis hit Scarsdale in March, no one knew what to worry about first. Little was understood about how the mysterious and possibly lethal virus could spread and residents were huddled in their homes, frightened and uncertain about what they could and could not do.

Our public officials quickly took action, and did what they could to send medical help to those in need and disseminate information about social distancing, testing and provide information on where to go for help.
They also realized that even though Village Hall was shuttered, they would need to work quickly to ensure that the Village had enough money in their coffers to fund public services and meet village obligations in a time of great uncertainty.

At a meeting held in the midst of the crisis on March 25, 2020 the trustees set aside $3.5 million into a COVID emergency fund to ensure that funds would be available to pay for essential services in the event of the loss of funds from revenue streams. Funds were drawn from both the 2019-20 budget and the 2020-21 budgets from a variety of sources identified by Village staff. The trustees also put an austerity plan in place to limit spending over the coming months.

The move appeared prescient when the Trustees reconvened on August 11 to consider how the COVID crisis had impacted Village finance. Village Treasurer Mary Lou McClure, who announced her retirement earlier this year, delayed her departure to shepherd the Village through this crisis. Mayor Samwick thanked both the Village Manager’s Office and the Village Treasurer for finding funds to create reserves to cover shortfalls.
At the working session on the budget McClure ran through an analysis of where Village finances currently stand and how the Village could manage the 2020-21 fiscal year. She presented Scenario 3 which included current numbers and projections for this fiscal year.

She explained the sources of the $3,485,000 that had been set aside to fill potential revenue gaps. Approximately $1.440 million came from savings to the 2019-20 budget achieved by restricting departmental savings, another $340,000 in adjustments to the 20-21 budget and another $1,705,000 from deferring capitol projects including:

-Hutchinson River Drainage Project $450,000
-Library Debt Service Mitigation $100,000
-Heathcote Road Bridge $1,000,000
-Girl Scout House Improvements $100,000
-Village Hall HVAC Repair. $55,000

Total $1,705,000

McClure explained that non -tax revenues had fallen during the crisis and ran through her assumptions on these reductions. She explained that since residents stopped commuting during the crisis, the Village extended annual parking permits for three months to compensate those who purchase permits last year. The Village took big losses on revenues from parking permits at Freightway, Christie Place and from valet parking. Parking meter fees dropped by 50% as the Village was closed and no one was shopping. The Village also experienced drops in mortgage tax, building permits and court fines as well as interest income. Due to the fact that the Village could not operate their summer camps, they experienced another net loss of $74,748.

Here are the estimated losses in Scenario #3

-Sales Tax - ($900,000)
-Parking Meter Fees – ($435,000)
-Parking Permits – Freightway ($543,125)
-Parking Permits Christie ($362,313)
-Valet Parking ($718,000)
-Mortgage Tax ($100,000)
-Building Permits ($100,000)
-Court Fines ($200,000)
-Interest Income ($390,000)

All told, after expenditure savings, revenues were $3,168,445 lower than projected.

With business reopening and a lively real estate market, McClure hopes that some of these losses can be made up in the second half of the year. However, she cautioned that weather events such as Tropical Storm Isaias could have further negative impacts on the budget as police and the Department of Public Works need to be paid overtime.

McClure explained that the total fund balance now stands at $15,733,000 which represents 14.11% of the Village budget. She was happy to have these undesignated reserves to pay for unexpected costs such as the storm damage the Village just experienced. About $8.35 mm of those funds are in the unassigned fund balance.

Commenting on the budget, Trustee Justin Arest said, “We have sufficient monies allocated and earmarked to cover the anticipated shortfall and a relatively healthy unassigned fund balance to protect us from future unknowns. As we move forward, we will have a better idea of longer lasting impacts. It is very possible that we will be left with a long lasting revenue shortfall caused by changing habits and reduced governmental aid. We must have conversations about our operating budget. Have we learned ways to make our processes more efficient? Is there technology we can implement or use better to allow us to eventually do more with less? And, if these are answered in the negative, then we must have difficult discussions about where we should consider creating budgetary reductions.”… given the current crisis and uncertainties that lie ahead, I believe it behooves staff to meet with the Board and the Community regularly to ensure everyone is on the same page in terms of priorities and discussing possible changes before we get too far ahead. This needs to be done starting in September and not in December. Let’s schedule more meetings. I know we are in a crisis but we are going to be in it for quite some time. We must be able to continue operating and exercising our role as a policy and oversight body.”

“…We cannot sacrifice important infrastructure and capital projects in the medium and long term as the solution to revenue shortfalls. We do have over 14% unassigned fund balance but is it prudent to start depleting that account without a plan to replenish it? And, should these monies only be used for the unexpected? These are of course just some of the questions that need to be discussed.”

“Six months ago I had been thinking about the need for a Scarsdale 2030 or 2040 plan. I think we may need this even more now. At the very least, a conversation is warranted about the Scarsdale we want to be- How we can lead and how we can ensure we remain a desirable place for people to move to and thereby help support our property values.”

Trustee Jane Veron agreed that “this budget meeting could not come soon enough.” She said, “I am a planner by nature”… and, “We get the best result when we share views.” Looking toward the future she said, “We all expect that 2020-21 will be a challenging budget year….COVID impacts will ripple through the economy. I was elected to take care of Scarsdale today while planning for Scarsdale in the future….We are facing both medical challenges and weather events are occurring….COVID has forced us to re think service delivery….There are efficiencies to exploit…. What can our department heads do to serve residents and cut costs? There needs to be room for immediate needs and future plans. We need to meet regularly to share and test new approaches….We have the balance of this year to be creative.”

Trustee Jonathan Lewis said, “We prepared for $3.4 million in reserves to cover this … Are some of these funds already in reserves? We haven’t discussed the proper level of reserves but perhaps we should. We have $15.7 in reserves as of May 1 – we anticipate drawing these down to fill the gap? I think what we need for the next meeting is how the designated and undesignated fund balances will be impacted by the numbers in this scenario. I think we need to go up tempo in our planning and we need to re-envision how we’re doing business to consider the long term impact of these trends.”

Mayor Samwick clarified, saying “There is $8.35mm in the unassigned fund balance. That’s what Moody’s uses for the rating, not the entire fund balance. Our buffer is the $8.35mm unassigned fund balance.”
Arest added, “There is clearly a reduction in our total fund balance. If we continue to have shortfalls in our operating budget, where will we make these up? And Veron said, “We don’t want to assume that deferring capitol projects is the best route. When we deferred road repairs, we saw the ramifications.”