Shuttered business leaves local governments hurting

TRI-COUNTY — As the private sector has taken a financial hit, so have local government budgets. With businesses closed and many residents temporarily out of work, governments in the Big Bend may have to do without the taxes and other revenue they have come to depend on.

These problems are acute in the tri-county, where the economy runs on a variety of “nonessential” services, from the restaurant and hotel industry to art shows and festivals. And nowhere in the tri-county may have it worse than the City of Presidio — a jumping-off point for tourism to Mexico and nearby state and national parks, and where city leaders run a $4 million annual budget with little to no cash reserves.

The problems came to a head at a city council meeting in Presidio last week, when city leaders broached a topic they’d dreaded discussing. City Administrator Joe Portillo said at the meeting that Presidio could see a budget shortfall of $800,000 — nearly a whopping 25 percent of the border city’s annual budget.

Those figures, he said, mean that Presidio will need to “make some tough decisions in the next 30 days or so.”

Best-case scenario, he said, the city could try to take out an emergency loan or seek other relief from the state or federal government. Worst-case scenario, the numbers could force layoffs of city employees or a “straight across-the-board decrease” in city salaries.

In interviews over the past week, city leaders said it is too soon to be talking specifics about layoffs.

Portillo stressed that the budget numbers are “very, very preliminary.” But he added: “If this continues, something has to give. I don’t have a machine that makes money, and my bank account will eventually go to zero.”

“I need to tread very lightly,” Portillo said of the topic of layoffs or pay decreases. “People are already in a state of panic. People are already wondering, ‘Am I next?’”

Still, he added, “If we’ve learned anything during this pandemic, we’ve learned to differentiate between what is essential and nonessential.” He predicted city leaders would soon be having “frank discussions” about cuts — though he stressed that laying off workers is an absolute last-case scenario.

Mayor John Ferguson stressed the same thing: Cuts to staffing or pay would be a last-ditch effort to keep the city from going into the red.

“Everyone who’s still working [for Presidio city] is providing a very essential service,” he said, from collecting garbage to processing wastewater. “I would really, really want to look into finding some funding so we can maintain our operations.”

On Friday afternoon, city leaders were hopeful. Governor Greg Abbott was soon scheduled to hold a teleconference with local leaders, and Presidio city officials planned to ask about emergency funding for cities. But while Abbott touched on the topic briefly, no concrete plans or promises came out of the meeting.

In a follow-up interview on Monday, Ferguson acknowledged that the state’s plan to help out cities like Presidio is “unclear” but said he is “hopeful” that state leaders are listening to local officials and “seeing [the problem] for themselves.”

After all, Ferguson said, the city must continue serving its residents — that is non-negotiable.

“We have to maintain our services for the community because they’re essential,” he said. “I don’t know how we’ll continue on if we come to a point where there’s no money left.”

But as City Administrator Portillo pointed out, one issue with the coronavirus pandemic is that — unlike previous disasters — it isn’t localized.

When Harvey decimated Houston, California could step up to help. And when wildfires decimated California, Texas was likewise in a position to provide aid — including by sending firefighters to the region.

But from money to medical supplies, “our dilemma today is that this pandemic is from East Coast to West Coast,” Portillo said. Most places are hurting and in need of aid. And just like with medical equipment for coronavirus patients, banks and federal leaders will likely have to triage.

 

While other communities in the tri-county may not yet be in Presidio’s position, cities across the region are also dealing with their own shortfalls.

In Marfa, Mayor Manny Baeza said coronavirus will be a financial hit for the city budget this year. Asked how economic slowdown due to the coronavirus might impact Marfa’s budget, Baeza said, “Sales tax of course plays a huge role, then your revenues of water, sewer, garbage.” Cities across the state are awaiting the March sales tax data from the comptroller to see how steeply sales tax revenues declined during March as businesses shut down.

Beyond the city and state mandating closures for many businesses, Marfa and Presidio County also closed hotels and short term rentals. Hotel Occupancy Tax revenue will impact grant funding from the city, and those closed short term rentals will result in losses to the city bottom line. “Just by turning those short term rentals into residential garbage rates, that’s going to run us close to $5,000 a month in losses,” Baeza said.

Though Democrats in Congress attempted to negotiate $150 billion in funds for state and local governments this week, the provision was ultimately left out of the most recent coronavirus relief bill.

Now six months into the city’s fiscal year, Marfa City Council is having a budget workshop today, Thursday, at 6 p.m. and budget amendments are on the table. Baeza mentioned various potential cuts to the budget mid-year, including reassessing the various capital improvement projects the city had allocated funds for this year. Marfa had budgeted an extension to the fire department facilities, an outdoor addition to the USO building, various investments in heavy machinery and an engineering project for Marfa streets.

Of potential budget revisions, Baeza said, “Nothing is set in stone right now, but it’s going to be a rough fiscal year.”

In neighboring Alpine, city leaders in February had their best sales-tax month ever, with over $150,000 in revenue. But City Manager Erik Zimmer said he was “real anxious” to see how the March receipts would be.

It wasn’t all bad news, Zimmer said. The pandemic meant the city could cut back on some expenses, including travel for city employees. With residents stuck at home, some might theoretically use more city utilities. And while residents stocked on supplies, businesses like Porter’s are doing more business than usual — though Zimmer stressed that much of Porter’s wares are essential and therefore might not contribute as much to sales-tax coffers.

But there are nonetheless major concerns. Sul Ross State University is the “biggest driver of the economy here,” Zimmer said — noting that the school already had falling enrollment before the coronavirus crisis. And with the school canceling events and in-person classes, less students and university visitors will be shopping and supporting the economy in Alpine.

“I don’t think [SRSU] is going to have people in town,” he said. “All of that impacts the amount of money we have.” Still, he stressed it is “too early” to know how exactly coronavirus will impact Alpine’s budget.

As tri-county leaders brace for the possibility of freefalling budgets, the canary in their coal mines may be hotels.

Occupancy rates for Alpine hotels sit at a dismal 15 percent, according to Zimmer. But that is still better than the rest of the state, which has, on average, less than 10 percent occupancy.

“To say the situation is dire is probably an understatement,” said Chris Ruggia, Alpine’s director of tourism. A “significant number” of hotels are at zero occupancy, he said.

Ruggia did not have concrete numbers for how much money Alpine hotels are losing. Hotels only report earnings on a quarterly basis, he noted, and Alpine is offering hotels the option to defer their taxes and utility payments upon request.

Both factors make it hard to know exactly how hotels are doing financially — and Ruggia doesn’t want to press the matter. “Honestly, I’m not going to ask the hotels for anything that’s not an emergency need,” he said. “They have a lot on their minds.”

Like Alpine in general, its hotels were doing exceptionally well before the coronavirus crisis — with Alpine hotels already netting 48 percent of their total HOT payments from the previous fiscal year. The question now is how much the situation will deteriorate.

In his interview on Tuesday, Ruggia prepared a few economic projections for hotels in the area and the impact on local HOT revenue. One projection showed the situation improving by fall — a projection Ruggia acknowledged was “obviously an optimistic guess.” Another showed them bringing in no more HOT revenue at all.


 
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