The city of Vancouver is expecting to lose out on at least $30 million and as much as $60 million as a result of the COVID-19 outbreak, mostly in lost sales-tax revenue.
The range is broad because nobody really knows how long the current economic shutdown is going to last, said Natasha Ramras, the city’s chief financial officer. But it will leave a deep crater in the city’s coffers — $60 million would amount to about 40 percent of Vancouver’s annual general fund, which at this point is being regarded as the worst-case scenario.
“Until we have a little more information, we don’t yet know what, truly, the final impact will be,” Ramras said. “In this environment, it’s hard to be precise because the data simply is not there yet.”
Vancouver City Manager Eric Holmes sent out an email to staffers Friday detailing how the city plans to balance its budget in the meantime. The plan includes $30 million worth of belt-tightening measures at City Hall, including a halt on fund transfers and discretionary spending, a freeze on new hires and potential staff layoffs.
Holmes also said the city plans to draw down $15 million from its emergency reserve fund, built up after the Great Recession in 2008.
“The fiscal implications of the pandemic on the city cannot be overstated; every part of the organization will be impacted,” Holmes wrote.
Vancouver’s general fund comes from three sources: sales taxes, property taxes and utility taxes.
The city’s monthly sales-tax receipts haven’t been calculated since the coronavirus hit in earnest — they’re recorded two months in arrears, Ramras explained, so the most recent data available is from February. But since the governor’s stay-at-home order shuttered businesses across the city, Vancouver is anticipating a massive drop-off in sales-tax receipts.
Ramras added that a temporary waiver on state sales-tax collections means that the city might not see its March receipts until August, keeping the scope of the deficit from being fully understood until then.
Utility and property taxes have been less impacted than sales taxes in the short term, Ramras said. But depending on how long the economic downturn lasts, that could change.
“If the unemployment runs high, and people run through their savings, at some point they can’t afford to pay mortgages. We’re not seeing anything yet, but if the recession continues until the rest of 2020 — which it’s highly likely to at this point — then we might see negative impacts,” Ramras said.
The general fund pays for most major services provided by the city, save for water and sewage operations. It covers police, fire and parks, among other departments.
Most transportation functions had previously been funded through a separate streets fund, but last year’s passage of state Initiative 976 effectively eliminated Vancouver’s Transportation Benefit District. The issue was still up in the air when the virus hit.
Pumping the brakes
Vancouver’s economy, which until the COVID-19 outbreak had been humming along, could see further damage as a result of the long-term development projects derailed by the virus.
Chad Eiken, the city’s economic and community development director, said that some strategic projects have remained on track, but his staff is remaining in “rapid-fire response mode.”
“At the management level, we’re all just trying to get our arms around, ‘What does this mean?’ ” Eiken said. “Things are evolving so fast, it feels like almost every day there’s some new piece of information or something we have to adjust to.”
Multifamily housing projects, like the construction site at Block 10, the fourth Vancouvercenter tower and the development of the historic Providence Academy site, are exempt from the statewide economic shutdown.
“Those have been allowed to keep going,” Eiken said.
But other projects, including large-scale strategic developments, might see more serious impacts.
For example: Section 30, the east Vancouver site once home to the English Pit mine that’s been ripe for redevelopment for over a decade. Last year, printer and PC company HP was the first business to announce a forthcoming move to a new campus on the site.
The city is aiming to develop Section 30 into a hub for light-industrial and office buildings, similar to the nearby Columbia Tech Center, which is now the single largest taxpayer within Vancouver.
But any move to Section 30 would depend on a major infrastructure overhaul. HP had planned to start grading work on the land later this year, Eiken said.
“I don’t know for sure if that aspect is on track,” Eiken added. “I know they do plan to come in fairly soon with a proposed master plan.”
HP’s move is also contingent on the city’s plan to build out Southeast First Street, currently a rural two-lane road that will eventually need to support the traffic of a major arterial once the Section 30 campus is up and running.
Work on Southeast First Street had been scheduled to start this summer. Now, that’s a question mark.
“We are anticipating reductions in revenue that would be coming into the general streets and fire fund, and that puts further challenges on Southeast First Street. We do think it’s very well positioned for stimulus funding,” Eiken said.
“This would be probably our top priority. If we can secure some of this stimulus funding for that project, it’s going to help us come out of this at the other end.”