Short economic recovery period key to Louisville’s fiscal future

About this series: BizWest is investigating the effect of the COVID-19 pandemic and resulting economic stress on municipal, county and state governments, including furloughs, layoffs and budgetary deficits. Articles will be published daily on various jurisdictions.

LOUISVILLE — If Colorado’s economic recovery after the COVID-19 shutdown is more V-shaped than U- or W-shaped, Louisville may be in good shape to weather the storm without major budgetary headaches. 

“The city is able to withstand relatively severe economic downturn in 2020 without a significant disruption to our current service levels as long as the recovery period is short,” city finance director Kevin Watson told Louisville leaders during a recent briefing on the budget. 

In 2019, revenues were $21.3 million and higher than the city anticipated, he said. Coming into 2020, Louisville had $10.8 in general fund reserves, or 63 percent of the fund’s annual budget. 

City finance staffers recently examined three scenarios and the impacts they could have on the budget through 2024.

In the best case scenario, Louisville sees a 20% decline in sales tax revenue and a 10% decline in consumer use tax revenue but a rapid recovery with revenues approaching pre-coronavirus budgeted levels by 2021. 

“We would still be able to support our current service levels and stay far ahead of our targeted fund balance,” Watson said. “We should be able to get through that very well.”

The second scenario envisions a 40% decline in sales tax revenue and a 20% decline in consumer use tax revenue with revenue recovery by 2022

Under this scenario, “the general fund is still capable of funding the current service level in the short term, but will not be able to maintain reserves above the targeted level for the long term,” according to a city memo.

In a situation with the same revenue reductions but no full recovery until 2024, the calculus changes and the general fund goes into the red by 2022.

“If it’s going to be a long recovery, we would likely have to reduce capital projects and take a look at our operational costs,” Watson said.

Louisville has already taken measures to cut costs. Earlier this week, the city furloughed 218 part-time employees through June 19 and temporarily froze hiring of certain seasonal, part-time and full-time workers. 

“The city is facing considerable financial impacts as a result of the COVID-19 pandemic,” city manager Heather Balser said in a statement. “Like many of our local businesses, we anticipate a significant reduction in operating revenue. As a result, programming, hours of operation and service levels will look different when city facilities reopen.

© 2020 BizWest Media LLC

on Facebook on LinkedIn