Charleston faces multi-million dollar budget crisis from COVID-19

Charleston city leaders held their city council meeting Monday to discuss options as their...
Charleston city leaders held their city council meeting Monday to discuss options as their budget is now in the negative by almost $3 million.(WSAZ)
Published: May. 18, 2020 at 10:43 PM EDT
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All across the country we are seeing businesses open their doors and cash is once again starting to flow. But even though state's are lifting restrictions, municipalities are struggling.

"As we're wrapping up our end of the fiscal year, which is June 30, when we wrap that up, it's not looking too good," said Charleston City Manager, Jonathan Storage.

As the city of Charleston looks to the state to receive some of the $1.25 billion provided by the federal government through the CARES Act, Mayor Amy Shuler Goodwin is offering her help as the leader of the state’s largest city.

“I believe by working together, we have the opportunity to provide valuable insight into the challenges being faced by cities,” Goodwin said in a letter to West Virginia Gov. Jim Justice.

In the letter, written Monday, the mayor outlines the challenges the city faces.

Storage said the city entered the 2019 fiscal year with a surplus of about $4.6 million but now stand at a deficit of roughly $2 million, which he said is basically like a $3 million hit as they were anticipating at least an extra $1 million by June.

"When we were going into February, the city of Charleston was anticipating a $1 to $1.5 million surplus by the end of June," Storage told WSAZ. "Now, we're looking by June 30, about a $2 million deficit so we have been impacted by COVID-19 in a financial sense in this very narrow window of time by a total of $3 million."

Storage said they are trying to cut expenses wherever they can, things such as unnecessary spending and any travel has been reduced significantly.

He said they are looking at cutting things like swimming pools because it costs the city anywhere from $50,000 to $60,000 to open a swimming pool, and the city has four total.

"When you factor in the hiring lifeguards, concession stands, pool chemicals and maintenance, it's a very expensive endeavor," Storage said. "So we're looking at things like that."

Storage said the city needs to fill the budget deficit by the end of June because, they can't go into their next fiscal year with a deficit.

He said the reason for the deficit is the city is not receiving its typical business and occupational tax revenue, which is drawn from the community going out to restaurants, going shopping, things that we typically do on a regular basis.

"Over 40%, actually it's closer to 45% of the city's budget is based on business and occupation tax revenue. All of things we love under normal days that just went poof in the month of March and April and to a certain extent, right now."

Storage said the worst is yet to come as the city is on a delay when it comes to receiving tax revenue.

"This $2 million deficit that we'll have, which is actually a $3 million impact, only represents the economic decline that occurred from Mid-March to the beginning of April," Storage told WSAZ. "We are not going to see the effects of the complete shutdown that occurred during the month of April and into parts of May until July."

Which Storage said is why the city doesn't want to dip into the rainy day fund, which is their more than $4 million savings account, just yet. He said that's all they have so if they dip into it now and the worst is yet to come, it would be premature.

"If we do nothing, as we're standing here today and if we know businesses are going to be slowly coming back, we could be looking at a $15 to $20 million deficit this time next year," Goodwin said.

She said the only way to get out of this deficit is to receive funds from the state or federal government through the CARES Act or layoffs and furloughs.

"If we do not receive substantial assistance from either the state, or better yet, a congressional aid package that will hopefully come back in some form, we are looking at massive shortfalls in our budget," Storage said. "And the only way we can deal with that is to look at furloughing employees, layoffs and cutting essential services."

Those essential services would be firefighters or police officers, which both Storage and Goodwin said are going to be an absolute last resort.

Goodwin said the city can't rely on the federal or state funds to come in to help back fill the budget. Therefore, she's trying to search for ways to cut and invest.

"This is our crisis of today, cities will have such a difficult time recovering financially because of COVID-19," Goodwin said. "Number one priority is health and safety, but financially we are going to be devastated."

So far, city leaders said they are still deciding on what is to be cut from the budget.