MEMPHIS, Tenn. — After weeks of executive stay-at-home orders, closed businesses and social distancing, Memphis Mayor Jim Strickland presented budget projections to the city council Tuesday, showing the city facing massive losses.
At first glance, it’s a grim situation for the fiscal year that begins in July. The latest projections have Memphis losing over $80 million from a $711 million dollar budget.
“There is no way to absorb that size reduction in revenue without significant reduction in the services we provide to thousands of citizens and layoffs of hundreds of city employees,” Strickland told city council members.
Strickland said sales taxes, which represent about 23% of the operating revenues for the city’s general fund, are estimated to decline by 25%, as the hospitality and food and beverage industries are hit especially hard.
“Unemployment is on the rise and hundreds of businesses are closing, resulting in significant impact on gross business tax receipts and business fees. Many of the tax deadlines have been extended, so we will not know the impact until after the close of fiscal year 2020 in June,” he said.
The city does have a financial reserve of over $78 million, but it’s not as simple as applying savings to this coronavirus hole. The mayor expressed concerns about future budgets for years to come, so emptying the reserve is an unsafe solution.
The city’s future hinges on details still-to-come related to the federal CARES act.
Depending on how city governments are allowed to spend the financial aid, Memphis could face a large spending hole, or just keep its head above water*
“Best case scenario, we’ll be able to just have the status quo,” Strickland said. “This year’s budget will be able to fill the gaps and basically have a repeat of this year’s budget. Nothing increased.”
If federal aid becomes available, Strickland said he would come back to council in two weeks with a line-item budget that had more detail. He said raises for city employees were off the table for the coming year.
“I look forward to working with you to find our way out of these dark times—together,” he told council members.