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Budget under the weather

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Editor’s Note: This story was originally published in The New Political’s summer magazine.

On March 9, 2020, Ohio confirmed its first three cases of COVID-19. Later that day, Ohio Gov. Mike DeWine declared a state of emergency. 

Within days, Ohio University transitioned to a virtual format for the remainder of the semester. Students were asked not to return to residence halls and to schedule a time to move out.

Days later, Ohio went on lockdown. Most businesses were ordered to close, and a stay-at-home order asking Ohioans to leave their homes only for essential activities went into effect March 23.

Under the lockdown, Athens became a ghost town. Residence halls were almost entirely vacant and students that stayed in town, with little actually open for business, were stuck inside completing online coursework.

Ohio U’s local campus reported 22,706 students enrolled for the fall 2019 semester. In a regular year, most students vacate Athens for summer break. As a result, businesses in town operate with reduced hours or temporarily close due to a dip in revenue. 

With Ohio U students vacating campus in March, however, this dip in revenue occurred months sooner than what the city and local businesses were prepared for. Workers were laid off and businesses temporarily shuttered.

According to statistics from the Ohio Department of Job and Family Services, Athens County’s unemployment rate reached 11.3% in April 2020. In April 2019, Athens County’s unemployment was estimated at 3.8%, according to the U.S. Bureau of Labor Statistics, which was near the national average of 3.87% and below Ohio’s average of 4.1%. 

Ohio U is the largest employer in Athens County, accounting for 17.6% of the county’s total employment, according to the county’s 2018 Comprehensive Annual Financial Reports.

The sudden drop in population forced the city to reevaluate its 2020 budget due to reduced revenue.

The Athens city budget is put together by the mayor and local department heads in conjunction with Kathy Hecht, the city auditor, who calculates the city’s payroll and monitors its revenue. Department heads make recommendations to the city based on what each department needs, from more personnel to new computers.

After everything has been finalized, the budget is voted on by Athens City Council. Throughout the year, Council can amend the budget should something unexpected arise, like an equipment malfunction or the need for an extra employee. Or a pandemic. 

Besides state and federal grants, the city’s two largest sources of revenue are income tax and property tax. Withholding tax, or tax taken directly from one’s paycheck, is the city’s largest source of income tax. This money is then distributed to several funds, such as the general fund.

The majority of income tax revenues goes into the general fund, which supports departments and services that don’t make money, like the fire department or the police department. Additionally, while the court or code enforcement charge for court fees and parking tickets, the money received is not enough to support these services without the general fund.

With Ohio U and local businesses closing unexpectedly this spring, and with many people out of work, the city’s income tax revenue took a hit that Hecht said they won’t make back.

“People are not working. Even if they come back and everything opens up in the fall, we’ll just be where we would have been anyway. We will not ever recoup the income tax money that we lost,” she said.

As of June 1, Athens has made $221,000 less in income tax than it had at this point last year. Hecht said that she expects the city to lose several hundred thousand dollars in revenue total.

Because of this new strain, the city has been taking measures to reallocate funding. During the June 1 Athens City Council meeting, the Council authorized the movement of $100,000 from the transportation fund to the city’s general fund. This amount, Councilmember Sam Crowl said, is not needed for transportation and was moved to help with the city’s “budget crunch.”

At the meeting, the Council also gave Hecht permission to make over $1.2 million in budget cuts between personnel and capital outlay, such as infrastructure and road improvements, through August 2020.

She reassured the Council that she would not make cuts without first notifying affected departments and receiving the administration’s approval, despite the leeway that the ordinance gave her in making those decisions. 

Hecht also addressed concerns that personnel cuts would result in layoffs. She explained overtime expenses have been low due to a mild winter and the cancellation of events like fests.

“We’re taking that out of the budget so that money can be freed up and used somewhere else right now,” she said.

Mayor Steve Patterson said that some emergency overtime would still exist.

“That, you can’t anticipate — clearly its name — and therefore we have to have things like that continue to move forward. But trimming down overtime — that’s what you’re seeing from personnel (cuts),” he said.

He also said the reduced population has lessened the load on sewer and water systems and the mild winter combined with less vehicular traffic has had a positive effect on road surfaces.

Still, he said the city will be tracking its revenue closely through 2021 to be as frugal as possible with its income tax.

“Making these changes now — the ones that we’ve made — nobody has been furloughed, nobody has been laid off, but we are certainly watching these revenues,” he said.

Council also approved a change in the distribution of income tax funds, taking 1% of those funds away from the transportation assistance fund to increase the general fund’s share of income tax distribution from 73% to 74%, effective July 1. 

“One of the reasons our transportation fund lines are solid is because HAPCAP has done such a nice job on getting grants for some of the pieces of the Athens city transit that City Council supports, so we’re able to move this 1% from the transportation systems fund into the general fund,” Crowl said.

Council also requested that Patterson implement a hiring freeze on future city employees until a review of the position in question has taken place to further help control the budget.

Councilmember Arian Smedley said it’s best to look at vacancies as opportunities.

“To evaluate what you can do with that position — keep it, change it, eliminate it and that sort of thing — and I’m sure that’s something that we do already,” she said. 

It’s unclear what effect the year’s lower revenue will have on the 2021 budget, but in the short term, the city’s goal is to not have to furlough or layoff its employees, according to Hecht.

“One problem for me that’s been harder is that everybody wants to know ‘where are we going,’” she said. “It’s been an unprecedented time for me to predict revenue.

“As summer goes on and other businesses close, or other entities layoff and furlough and cut salaries, it will continue to get worse, and there’s just no good way for me to predict that, or anyone, in my mind,” she continued.

Many local businesses, like Casa Nueva, have taken precautions to prevent the spread of COVID-19, including requiring employees to wear masks and undergo temperature checks. Grace Corbin, Casa Nueva’s marketing coordinator, said that the restaurant is fortunate to have a loyal customer base. She said that although revenue is down, they still have been able to bring in some revenue.

The cancellation of Ohio U spring events, like Mom’s Weekend, which Corbin said is one of the biggest weekends for many Athens businesses, caused a large dip. Casa adjusted its staff and reduced its hours of operation to accommodate the decrease in business, she added.

Casa’s bar was closed as of June 1, but the restaurant pivoted to selling its cocktails for carryout, a move Corbin said made a big difference.

“While we didn’t have that huge bump in revenue when we wanted it and when we expected it, we hope that by the end of the year we’ll know that we scaled things properly to adjust for the lack of that,” she said.

But despite the challenges, Corbin added that the community’s support has made it easier and more tolerable.

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