Coronavirus deals $40M blow to Tacoma budget; projects canceled, staff reductions discussed

TACOMA, Wash. — Tacoma’s budget is poised to take a financial hit due to impacts from the coronavirus pandemic.

Staff project a loss of around $40 million in the city’s general fund as services and businesses across the city halt operations.

The impacts will be felt across all revenue sources, city budget officer Katie Johnston said during a budget presentation earlier this month.

“That includes sales taxes, businesses and occupation taxes, event-based revenues, hotel/motel tax, construction-based revenues — all those will see direct impacts as we have closures and job losses in our community,” Johnston told the City Council.

The city has identified $28 million in one-time savings by allowing job vacancies to go dark and taking from capital projects and 2020 initiatives.

Some of the projects being canceled in 2020 are Gas Station Park, meetings to address additional homeless shelter capacity, an additional fire engine, a public boat launch on Thea Foss and Youth Commission support.

The city also plans to use $10 million from general fund reserves as part of the $28 million in savings.

Reserves currently sit at $43 million, about two months’ (16.7%) worth of annual expenses. Tacoma’s reserve policy directs reserves to be maintained between 10% and 20% of projected annual expenditures.

Using $10 million in reserves will drop the city’s reserves to 12.8% of annual expenses, still within the city’s reserve policy.

That still leaves a $12 million gap that will stretch beyond regular services and programs that aren’t one-time.

Staff have started the initial phase of a personnel reduction, including voluntary programs like early retirement incentives, time schedule reductions and unpaid status options. The next phase includes nonvoluntary reductions, meaning furloughs, wage adjustments or layoffs.

The city could face an additional $30 million loss in 2021 from long-term impacts. Staff are working this year to draft the 2021-22 biennial budget.

“It’s quite sobering to see the kind of decisions we’re going to have to make in the face of COVID-19,” Mayor Victoria Woodards said during a budget update Friday.

2008 RECESSION

Compared with the last recession in 2008, the city’s loss of revenue is stark and immediate, Johnston said at a City Council meeting earlier this month.

“It’s a very different situation in terms of the suddenness of the drop,” she said.

The last recession impacted the city over the course of a four-year period, compared to the past couple months amid the coronavirus pandemic.

Between 2007 and 2009, Tacoma’s sales tax dropped 20%, or over $8 million. The city’s B&O taxes dropped by 13%, or $14 million, between 2008 and 2010.

Between 2009 and 2011, the city made cuts totaling $42 million, including eliminating 80 full-time-equivalent positions. In 2011, the city needed to cut an additional $30 million in expenses and further cut 82 FTEs.

Johnston recalled images of Tacoma Mall and Sixth Avenue amid the last recession.

“During that period of time, there were still businesses in operations. There were hair salons in operations. There were dental offices in operations. We had restaurants and retail establishments still open and working,” Johnston said.

Even industries that may have been largely shielded from recessions in the past, like education and health care, are struggling now, she said.

“These industries are not just not hiring, they’re actually taking those actions and shutting down — definitely a more severe impact than we saw in the past,” Johnston said.

Nationally, 8.7 million jobs were lost during the last recession between 2007 and 2009.

In the last month, 22 million people filed for unemployment.

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