The pandemic continues to disrupt the city of Hermiston’s finances, as the city’s ending fund balance in October was below the minimum reserve level set by the city council.
The council previously adopted the minimum reserve policy requiring at least $1,867,650 in its general fund at all times. But in September, the fund dipped below that amount while the city was waiting to be reimbursed by the CARES Act for money it had spent on COVID-19 relief for residents and businesses. During its Monday, Nov. 23, meeting, Finance Director Mark Krawcyzk said it happened again in October by $309,000.
Krawcyzk said from March to June the city had about $750,000 less revenue than projected due to the effects of COVID-19. He said the city was able to spend about $250,000 less than planned by telling departments to only spend on “mission critical” items, but that still left the city with about $500,000 less than expected.
Krawcyzk said he and City Manager Byron Smith had been putting policies in place to help the city keep its minimum reserve up during the “skinny months” of September and October before property taxes start coming in in November.
“COVID wrecked our plans,” he said. “It is not because we weren’t prepared. I believe we were. But nobody saw COVID coming.”
He said there were things they can do in the coming months to better compensate for the ongoing effects of the pandemic.
Mayor David Drotzmann said the point of the minimum reserve level set by the council was to ensure that if something catastrophic happened, like COVID-19, the city still had plenty of money in its account to pay its bills. That cushion seemed like it worked in the past two months, he said.
“The intent of the minimum reserve is to create a rainy day fund, and it’s hard to argue it’s not raining this year,” he said.
He said the important thing now is to look at how the city will help it not happen going forward, and how the city will rebuild its reserves to a higher level as the economy recovers.
Smith said city staff are working hard to come up with solutions, but if the pandemic causes a significant reduction in property taxes for the year, it could mean a reduction in staff for the city.
“Depending on the impact of property taxes, if we have to look at significant expense reduction we’re going to have to start looking at people, and so that will be on the table as we start looking a the budget coming into April, May, June of next year,” he said.
In other financial news, the city received a clean financial audit, conducted by Barnett & Moro, with no material weaknesses found.