Local Cities Face ‘Unprecedented' Budget Crunch

Coronavirus shutdowns have drastically reduced sales tax revenue, which account for a significant portion of city budgets

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Cities in North Texas have been weighing the impact that the coronavirus pandemic could have on their respective bottom lines.

Sales tax revenue, which can account for up to 30% of a city’s overall budget, has plummeted in recent weeks with millions of people out of work, and with thousands of businesses forced to close their doors because of stay-at-home orders.

Bennett Sandlin, the Executive Director of the Texas Municipal League, an organization that supports and represents several cities across the state, said that cities “have their backs against the wall,” in terms of their budgets.

“[I am] very concerned. Cities don’t operate on big margins and have limited reserves, typically three months of expenditures,” Sandlin said. “If sales taxes account for 28% of an average city budget, and those sales taxes go into the tank, possible drastic cuts are in store.”

Representatives from the cities of Dallas, Fort Worth, Arlington and Frisco provided some details for how they are already working to cut expenses, while they also work to evaluate just how much of a hit the drop in sales taxes will result in.

Dallas has already implemented a hiring freeze, restricted travel for city employees and reduced “non-mission critical spending,” according to a city spokesperson, who added that all budgeted expenses are being reviewed to determine what further reductions might be necessary.

Fort Worth, Arlington and Frisco have each already taken similar steps to reduce expenses.

In addition, the City of Fort Worth has deferred some capital improvement projects, meaning it will delay planned work, according to City Manager David Cooke. A city representative added that multiple projects involving parks in the city are among those that will be put off until a later date.

“Current projections for the next six months estimate the City of Fort Worth seeing a 30 percent decrease in sales tax revenue,” Cooke said. “Given the current landscape, we are starting our internal budget process early in an effort to provide City Council and residents with an honest report on our financial standing.”

Among the many steps that the City of Arlington has taken is to delay its police and fire academies for new recruits that were scheduled to begin this summer, according to a city spokesperson, and to delay water-related capital projects for the next 60 days.

“The loss of revenue from sales tax and tourism is unprecedented and will be significant for the City of Arlington,” said Jay Warren, Directors of Communication and Legislative Affairs for the city. “We can’t print more money or run deficits. Just like our residents, during tough economic times, we have to tighten our belt to make sure that the budget is balanced.”

In Frisco, the city has furloughed all of its part-time employees, according to a city spokesperson, and the current projection is for a 50 percent reduction in sales tax revenue for the remainder of 2020.

Fort Worth, Arlington and Frisco each indicated that laying off city employees would be something akin to a “last resort,” because, in addition to the impact to those employees, those layoffs would also undoubtedly affect city services.

*Map locations are approximate, central locations for the city and are not meant to indicate where actual infected people live.

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