The City of San Antonio expects to end fiscal year 2021 in fairly good financial shape but will run into budget shortfalls over the next five years if spending isn’t reined in, according to City officials.
The recent federal stimulus package, $465.5 million from the American Rescue Plan Act (ARPA), is expected to mitigate those deficits, but it’s still unclear how exactly that money can be used, City Manager Erik Walsh told City Council and reporters on Wednesday.
“We made no assumptions” in the 2021 or five-year budget forecast regarding federal funding, he said. The aim of ARPA, for which the City received spending guidelines on Monday, is to “one, deal with revenue loss; two, to provide fiscal stability to organizations; and three, deal with immediate needs.”
That batch of stimulus money must be spent by the end of 2024.
If the City were to eliminate lingering employee furlough days and ease a hiring freeze while restoring street maintenance projects, employee cost-of-living wage increases, economic development incentives, and citywide planning efforts, Budget Director Scott Huizenga said, “we would need to identify roughly $150 million over [the next] five-year period to fully balance the budget.”
The five-year forecast indicates that the City plans on using at least $174 million of the federal stimulus funding to recover revenue lost from fiscal years 2020 and 2021.
“The economy is showing signs of recovery,” Walsh said. “We’re seeing sales tax collections slowly rising, there’s a slight uptick in travel and tourism here [over] the last 60 days, and a very robust housing market and a lot of [residential building] permit activity.”
While sales tax and CPS Energy revenues have fared slightly better than expected this year, other sources of revenues – such as river barge ticket sales, taxes on alcoholic beverages, park reservations, and emergency medical service fees – have underperformed during the first five months of 2021.
But the City expects that increased sales taxes will cancel out that deficit by the end of the year, Huizenga said.
The hotel occupancy tax, another source of City revenue, took the biggest hit during the coronavirus pandemic and is expected to take the longest to recover. The tax is projected to produce $10.6 million less than expected in 2021, and the cumulative loss before its recovery in 2025 is estimated at $187 million, according to City and consultant analysts.
Much of the City’s arts and culture spending is directly tied to the occupancy tax, and several City Council members urged Walsh to find ways to more quickly recover that funding.
Because San Antonio took extra steps last year to rein in spending, Walsh said the City was in a better position to “provide critical services, keep City employment, and maintain our receivers and our financial latitude.”
While the City squeezed spending last summer, he noted, it will result in a “one-time benefit” this year.
The City reserved some of its social services and mental health spending to be able to shift funding where it’s most needed, Walsh said.
The City plans to use nearly $1.5 million in reserves to bolster emergency food assistance for seniors and homeless outreach and to connect at-risk youths to education and career opportunities.
Another $1.5 million would go toward assistance for children and survivors exposed to domestic violence as well as prevention of and intervention for postpartum depression.
Walsh said City Council will be briefed on ways the ARPA funding could be utilized during a June 2 meeting, which will provide a more clear financial outlook.
Council will review a draft 2022 budget on June 16 and will be asked for feedback during a budget goal-setting session on June 25. From there, City staff will take the month of July to finalize a budget proposal. Council and community input will take place August through Sept. 16, when Council is slated to approve the budget.
Next Thursday, Council will be asked to approve the budget for its sales-tax-funded SA Ready to Work program, a voter-approved initiative that aims to educate and train up to 40,000 San Antonians for better-paying jobs.
The four-year, $154 million initiative models itself after the one-year $85 million program Train For Jobs SA that started during the pandemic.
“If we’re going to get folks back to work, if we’re going to see a robust economic recovery in the city, we have to focus on ensuring that people do not have to work four or five jobs just to make ends meet,” Mayor Ron Nirenberg said. “The key [to the program] is flexibility and tying it to the actual real-world industries that are here in San Antonio that are paying well.”