Anchorage is projecting a $17 million revenue shortfall due to COVID-19

The economic impact of the COVID-19 pandemic has reached Anchorage’s municipal government, with the city projecting a $17 million revenue shortfall for 2020.

That represents 3% of the city’s general government operating budget.

But in a Friday interview, Anchorage Chief Financial Officer Alex Slivka said said the city plans to reroute CARES Act funds to fill the bulk of that gap.

Lost tax revenues account for $14.4 million of the shortfall.

City budget documents show the largest impact is from the city’s bed tax. Hotel and motel rentals were down 18% in the first quarter of fiscal year 2020, and 73% in the second quarter. Vehicle rental tax revenue was down 74% in the second quarter.

Not all taxes were down, however. The city’s tobacco tax revenue stayed relatively level, and the city’s marijuana sales tax is projected to bring in $500,000 more than it did last year.

Slivka pointed to an ordinance proposed by Mayor Ethan Berkowitz’s administration that repeals part of the CARES Act funding package approved by the Assembly.

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The ordinance would reroute about $61 million of that money to first-responder payroll, freeing up general fund dollars that would have otherwise gone to payroll.

That money could then be spent on projects that were questioned by the U.S. Treasury’s Office of the Inspector General. Rerouting CARES Act funds through first-responder payroll to make it easier for the city to fund certain projects was suggested by Treasury officials.

“You can use CARES grant funding to pay for public safety payroll, and then if that frees up any municipal general funds, those can be spent as you would ordinarily spend your money," Slivka said.

Part of what Berkowitz’s administration is suggesting to reroute is a near-$15 million contingency fund, which Slivka said so far isn’t allocated to anything. Moving that $15 million to first-responder payroll frees up $15 million in general fund money that can help cover the tax revenue shortfall.

“If the Assembly approves that, as drafted, the net effect will be that the municipality will be able to meet our obligations,” Slivka said.

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That still leaves a projected $2 million shortage, but Slivka said some spending has come in under budget through the remainder of the year, and the city could work to cut costs.

“As we get closer to the end of the year, we’ll have a better sense of, are we going to spend less than what we expected, are there any additional changes?” Slivka said.

The pandemic will likely have financial impacts extending past December. This week, the director of the Centers for Disease Control and Prevention predicted Americans likely will not have a vaccine until spring or summer 2021.

Slivka said the 2021 budget will be presented in October, and city budget officials are considering the pandemic’s impacts in preparing a proposed budget.

“We should be able to accommodate this and ... be able to meet the obligations we have both for this year, and of course, looking forward to next year,” Slivka said.