Kansas City Council preparing as metro cities could see huge loss in budgets

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KANSAS CITY, Mo. — COVID-19 could deliver a big blow to the budgets of metro cities. The Kansas City Council is preparing for a wide variety of outcomes.

The full council heard a presentation Thursday, given to the Finance Committee on Wednesday, about the worst case financial fallout from the COVID-19 crisis. 

Budget Director Scott Huizenga presented what’s called the Severe Pandemic Recession, modeled loosely on the Great Recession in 2008.

In March, when the shelter in place was put into effect, Huizenga presented a Mild Recession Scenario, but as the COVID-19 crisis wears on, the city council is preparing for the unknown.

“It could be something that’s not too painful or it could be something that’s really painful like furloughs and people being asked to take time off, or heaven forbid we have to lose some employees.” said Councilwoman Heather Hall, also the Vice-Chair of the Finance, Governance and Public Safety Committee. “Those are not scenarios we want to have happen.”

Money for city funded programs could also be cut.

The worst case predicts a $300,000,000 deficit to the General Fund over 5 years.

Tax revenue streams to fund it in order of size include:

  • Earnings tax
  • Sales tax
  • Property tax
  • Utilities tax
  • The Convention and Tourism tax, which is down 90% since March.

“Just like someone has an individual portfolio investment portfolio and wants to diversify, we’ve done the same with our revenues,” Huizenga said. “So if it’s a shock to one system there are others that help stabilize our revenue.”

The big question hanging out there is sales tax revenue. Because the state collects it, there is a two month delay before it gets to the city.

March collections were slightly up but the revenue from April and May could be key in pushing the budget scenario closer to a more realistic outcome.

With more revenue sources to pull from and a rainy day fund that has never been higher, Huizenga believes we are entering this time in a stronger financial position than the 2008 recession.

“We do have a strong foundation and we have a little time to ease into this and monitor the situation to see what really does develop,” Huizenga said.

Officials said the public has a lot to do with the financial fallout, urging everyone to be smart by following social distancing guidelines and wearing masks in public.

They believe that will help propel us forward in reopening and staying open, which will help boost tax revenue.

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