Sedona Finance Director Cherie Wright admitted that putting this year’s budget together during the pandemic had its challenges.
“This has been a fairly long process in going through this with all of the changes that we’ve made because of COVID-19 impacts,” she told the Sedona City Council on Tuesday, July 14.
With a 6-1 vote, council approved the tentative Fiscal Year 2020-2021 budget of $51,214,284 with the final budget hearing set for Aug. 11. During that time, the budget can be reduced but nothing can be added that would increase that figure.
This year’s budget is $200,000 less than the previous year’s budget, which ended June 30.
Sedona City Manager Justin Clifton has said the city is preparing for a $10 million shortfall over a 14-month period, which includes this entire fiscal year, which started July 1.
“Arizona law requires that a budget cap be set,” Wright said the day after the council meeting. “The most prudent approach is to set the cap at the highest level expected with room for contingencies. Since no one knows when or how quickly our economy will recover, we need to be prepared for the best-case scenario while planning for the worst-case scenario.”
Wright said the budget was reduced in many areas, however, it remained pretty much flat in total because of an increase in the capital improvements budget. The capital improvements budget includes numerous projects that many community members have requested move forward. These include the pedestrian crossing at Tlaquepaque, the Forest Road extension, restoration work for the old Ranger Station at the Brewer Road property, Posse Grounds parking improvements and several shared-use paths.
For many years, the city has had surpluses over and above the required reserve balances, Wright said. This has been a result of the strong economy prior to COVID-19 and conservative spending practices.
“These surpluses contribute to balancing the budget for FY 2021 with a projection of $16 million in surpluses still remaining at the end of the fiscal year,” she said. “The city has proactively restricted its current spending to only the most essential items, which has created savings that have helped offset the reduction of revenues.
“Also, revenues have been trending a little higher than the initial projections. Spending will continue to be restricted until more is known about the future impacts to the city’s revenues to ensure the city’s actual financial position remains positive.”
With sales and bed tax making up the bulk of the city’s annual budget, the decrease in visitors to the area has a direct impact on the city’s bottom line. Wright said they are estimating an 18% decrease this fiscal year in sales tax compared to Fiscal Year 2019-2020 and a 33% drop in bed tax compared to last year.
In April alone, bed tax was down 91% and sales tax down 57% compared to April 2019, which along with March, are traditionally the busiest months of the year for hotel occupancy in Sedona.
