City prepping for financial worst-case scenario

The COVID-19 pandemic has forced Hill City to take a look at its finances and prep for the financial worst-case scenario.

Brett McMacken, city administrator for Hill City, presented at last Tuesday’s Hill City Common Council meeting about steps that he and interim finance officer Stacia Tallon have been taking to prepare for the financial fallout from the pandemic.

“(Tallon) and I have been sitting down weekly for three or four weeks to get a sense of what (the pandemic) means for revenue,” McMacken said. “We have some businesses that are open but doing social distancing, some closed due to COVID-19 and some closed because of the season.”

The worst-case scenario for Hill City, McMacken said, would be hits to the property tax and sales tax with sales tax taking the biggest hit and property tax taking a modest hit.

The first six sales tax deposits to the state have looked “great,” he added, but that will change. The question is: how much will it change.

The city is monitoring the dollar amounts sent to the state so that the city has an understanding of what might happen financially in the future.

The city, too, does not get its first big revenue check until June or July because the busy summer tourism season typically kicks off Memorial Day weekend, meaning the sales tax money needs to be submitted first before the city receives it.

So far, McMacken said, the money from the winter and spring have looked “great,” and the city is up from where they were last year.

The city receives 90 percent of its funding through sales tax and property tax, however, and if the pandemic restricts the summer tourism season, the amount of sales tax dollars would be down.

Scenarios the city has examined, McMacken said, includes what if the city takes a 25 percent reduction in sales tax and 15 percent reduction in property tax.

The city, though, is looking at different numbers, McMacken said.

“One thing that we do know: what if it’s horrible? That’s not going to be a reality,” McMacken said. “Krull’s is selling things like crazy. Convenience stores are open. Businesses are function. It’s not going to be a 100 percent wipeout.”

If it is bad, McMacken said Hill City has a well-established emergency fund.

In his mind, McMacken said worst case scenario wouldn’t exhaust that whole fund.

“We have the funds and where-with-all that we can still function in the rest of the 2020 budget year without a problem,” he added.

But the city would not be doing its job if it did not take a look at areas where costs could be cut, McMacken said.

Areas such as travel (without traveling to and attending conferences the city could save up to $15,000) and projects such as the business improvement district board (BID Board) project and money for garbage cans and the mowing contract are where the city could save money.

One of the biggest financial hits from the COVID-19 pandemic would be to the BID Board project where the alleyway behind the Hill City Senior Center and the senior center itself would be redone.

“Without the tax revenue rolling in — at $2 per night tax for hotel rooms — we aren’t filling the coffers of the BID Board,” McMacken said.

He added that what he and Tallon are saying is that there will need to be belt tightening.

“I cannot guess what we are going to be down. We are trying to go through scenarios in our brains of what is coming,” McMacken said.

Alderman Bill Miner cautioned the city’s approach and should preparing for the worst-case scenario.

“I think to sit here and say I think we can weather this…I think is kind of naïve,” he said. “I would much rather institute some cuts now than wait until August or September. I’d rather be more conservative at the start of this, and if things wind up better then we can go back and say we can release some money. I am not of the opinion we can sit back and watch the ship sink and decide we should have done something.”