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Hoover could lose $8 million to $15 million in taxes due to COVID-19, mayor says

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Photo by Jon Anderson

The city of Hoover could lose between $8 million and $15 million this fiscal year due to the COVID-19 outbreak and resulting business shutdowns, Hoover Mayor Frank Brocato said in a letter to the public released late Tuesday night.

That amounts to 6% to 11% of the total $133 million that city officials expected to receive in revenues this fiscal year.

“This represents a serious blow to city finances, but we are working diligently with our City Council to finalize a plan that will protect our operations and allow us to keep providing services to our citizens, businesses and visitors,” Brocato wrote.

The city administration developed a preliminary four-phase plan for dealing with the financial crisis and is in the process of revising that plan with input from the council.

A draft submitted to several council members on Friday included a fourth phase of “emergency measures” that might need to be taken if the situation gets dire enough. Those measures included another sales and use tax increase, asking Hoover residents to pay a fee for garbage pickup, closing certain public facilities, considering a reduction in force, eliminating step salary increases for city employees and reviewing the amount that employees contribute toward their benefits.

However, City Administrator Allan Rice on Monday night told council members the city has not yet reached the point for emergency measures.

UPDATE: On Tuesday, Brocato removed the idea of a sales and use tax increase and the idea of a garbage fee for residents from the list of potential “emergency measures,” Rice said. The mayor would veto any proposed tax increase related to the COVID-19 crisis, Rice said.

now, the city is implementing certain “basic measures” and “advanced measures” in phases two and three of the preliminary response plan, Rice said. Some of those measures include a hiring freeze except in critical areas, proceeding with capital projects only if contractually obligated, cutting non-essential spending, limiting overtime to “public safety and welfare” needs, cutting out travel and conferences, eliminating some consulting work, and delaying the planned purchase of land next to the Moss Rock Preserve boulder fields.

Documents presented to council members indicate city officials believe they could save $2.7 million with “basic” cost-cutting measures and another $1.6 million with “advanced” cost-cutting measures, with most of those cuts coming from general fund expenditures.

Some additional “emergency measures” identified could save $2.8 million (mostly from capital expenditures), for a total savings of $6 million, according to the documents.

The cancellation of the SEC Baseball Tournament by the SEC eliminated more than $500,000 in expenses the city would have incurred, records show. If the city were to completely cancel its spring Household Hazardous Waste Day that thus far has only been postponed, it could save $100,000, while completely canceling Celebrate Hoover Day would save $62,000 and completely canceling the Mayor’s Prayer Breakfast would save $23,400, records indicate.

Brocato, in his letter to the public and businesses, said no one can forecast with 100% certainty what will occur, but the city does expect a downturn in revenue in the coming months. The possibility of losing $8 million to $15 million in revenue this fiscal year is based on an analysis of more than 1,000 Hoover businesses by the Hoover Revenue Department, Brocato said.

Preliminary revenue records indicate that city revenues were slightly over budget through the first six months of the fiscal year, which ended March 31. But with mandated business closures due to the COVID-19 disease, revenues will begin to fall below original expectations.

Chief Financial and Information Officer Melinda Lopez on Monday night told the City Council the city has about $100 million in cash in the bank, including money reserved for payroll and debt service, almost $33 million in reserves and about $3 million in unallocated capital money.

Despite belt-tightening measures already taken, city officials continue to look for other ways to cut costs.

Jim Wyatt, who has been serving as acting chief operations officer since Tim Westhoven’s departure earlier this year, presented city officials with a list of 27 capital projects totaling $9.8 million that could be considered for possible deferral.

Expenditures on the list of deferral options included:

Some of these projects are funded with special revenue funds, and eliminating those will not help the general fund, Wyatt noted in an email to other city officials.

Brocato said the Hoover City Council has received a detailed city financial statement every month of his administration and officials in his administration are providing council members with all the information at their disposal so the council can make sound decisions going forward.

City Administrator Allan Rice on Tuesday declined to release a preliminary four-phase financial plan for dealing with the COVID-19 crisis that was shared with several council members Friday, saying it was still being developed. However, the city’s public information officer late Tuesday night did release supporting documents that went with the four-phase plan.

Brocato said the four-phase plan will change and will be released as soon as his administration receives all feedback from council members.

However, the Hoover Sun obtained the preliminary plan through another source. The primary new information in it was the potential “emergency measures” mentioned early in this story.

Brocato said once additional changes are made, he will present the final proposal to the council for its approval.

“Even then, we will continue to discuss the plan with them and will make adjustments as needed to get our city through these challenging economic times,” he said.

Brocato said he and his staff are evaluating every aspect of the city’s financial operations.

“We are already finding ways to become even more efficient, and we will use those concepts to formulate the proposed city budget for next year,” he said. “Working alongside our City Council, we will make wise decisions for Hoover’s economic future that protect the quality of life we all enjoy and the things we love about our wonderful city.”

See the mayor’s full letter to the public and selected financial information related to the COVID-19 financial response plan.

This article was updated at 1:42 p.m. with comments from City Administrator Allan Rice, indicating that Mayor Frank Brocato on Tuesday removed the idea of a sales tax increase and the idea of a garbage fee for residents from the list of potential emergency measures that might need to be taken in the future in the situation worsened. Rice said Brocato would veto any tax increase associated with the COVID-19 crisis, if it were proposed by the council.

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