City of Nome ends 2020 in good financial position
The City of Nome passed their annual audit last week with a budget surplus of $463,701 despite a tumultuous year of COVID-19 spending. That surplus, along with some remaining unspent CARES funding, puts the City in a good financial position going into 2021.
When the pandemic first hit, city officials were worried it would mean financial troubles. The temporary closures of businesses meant less tax revenue, and the city also reduced the summer sales tax from seven percent to five percent, which City Manager Glenn Steckman said saved residents $500,000 but further reduced the city’s income. Between May and September, the sales tax usually bumps up from five to seven percent to capture additional spending by tourists, gold miners or other seasonal summer workers.
The City faced with a number of new expenses, including large amounts of Personal Protective Equipment, cleaning supplies and upgrades for the school district. But the federal CARES Act, passed at the end of March, offered relief in the form of almost $5.78 million over three payments. With that money, the City funded a large-scale transition to remote work, a number of public health measures and economic relief programs for Nome citizens.
Almost $2.14 million, or 38 percent of the total CARES funding, went to City payroll, more than half of which was under the umbrella of public safety. While some criticized the City for using emergency relief funding to pay salaries, Steckman explained that much of that spending was to counteract high public safety expenses during the pandemic’s early months. “Part of the original goal of the federal government was to make sure police departments and emergency services would be paid for in light of COVID activities,” he said. “We were doing a lot more patrolling at that time, so there was more overtime. That money helped the city as the city was seeing a downturn in tax revenues.”
The largest portion of the CARES funding – more than $2.36 million, or around 42 percent of the total grant – went to a combination of relief programs for small businesses and individuals including utility credits, business grants and stimulus checks to residents.
The remainder of the CARES funding went to a variety of purposes including public health supplies, remote capabilities for the school district and city offices, and upgrades to the Nome Food Bank.
Despite a dip in revenue and a jump in spending at the beginning of the pandemic, the final accounting of 2020 saw less spending than expected. The City had budgeted for $14.52 million in expenses at the beginning of the year, but only spent $12.32 million. This is largely because operating expenses, personnel salary and benefits, and building maintenance were all significantly below budget due to the closure of many city facilities and some difficulty filling empty positions.
Revenue from permits, licenses and fees also saw a decrease as many projects were put on hold, but total sales tax actually came in slightly above projections. By the end of the calendar year, the City had a general fund surplus of $462,701.
This is on top of the $227,894 in unspent CARES funding and the end-of-year $200,000 Community Benefit Share from Norton Sound Economic Development Corporation.
In last week’s City Council meeting, the council debated what to do with the $200,000 from NSEDC. Steckman originally requested that it go towards heating and ventilation upgrades for a number of city buildings including City Hall, the school district and the Rec Center. The Rec Center’s upgrades were initially going to be covered by CARES funds, but because the deadline for spending those funds was originally the end of 2020, that plan was scrapped. Getting estimates and starting the process of putting out the projects for bid, did not fit that time frame.
Other community members requested that the Community Benefit Share go to other organizations benefitting the public more directly. Ultimately, the council struck a compromise, promising $100,000 to building upgrades and $100,000 to community projects geared towards youth programs.
Steckman said the City wasn’t sure which community projects would receive the funding, but that the clerk’s office would put out a request for proposals in the near future.
He also said that the city buildings would still need to be upgraded. About five years ago, an engineering firm estimated that it would cost between $468,000 and $500,000 to upgrade City Hall’s HVAC system alone, which is now more than 40-years-old.
Those costs may have changed in the last few years, and the City is having engineers put together a new plan which they’ll then put out for bid. Any costs above the $100,000 from NSEDC will probably come out of the general fund, Steckman said.
“A surplus is not a bad thing for a city to have,” he added. “When you’re looking at the size of the city budget, it’s roughly 4 cents, 5 cents on the dollar. Most people don’t spend exactly to the dollar, and that’s how it needs to be looked at.”
As for the spare CARES money, Steckman said they’ll hold on to that for the time being. The latest version of the CARES Act says it doesn’t need to be spent until December 21, 2021, and the Biden administration is currently working to pass a new stimulus package.
“What we’re hearing is that there’s going to be a lot of money through additional PPP programs, and we’re just waiting to see how it all works out,” Steckman said. Depending on where the new stimulus money goes, the City’s remaining CARES money from last round can be used to fill in any gaps, he explained.
He also mentioned the possibility of throwing a Winter Festival, to make up for the lack of celebrations around Christmas as well as the absence of Iditarod in Nome this year. He admitted a Winter Festival wouldn’t totally make up for Iditarod, but it would help get people outside and potentially spur economic activity.
While no plans are set in stone, he did say a potential Winter Festival would still require people to wear facemasks and depend on a large enough portion of Nome residents getting the COVID-19 vaccine.
He added that the City is also discussing reopening some facilities starting July 1, but that also depends on vaccination rates, case numbers, and the recommendations of medical professionals.