Item 2 - City Manager's Memo

(

City of Phoenix
To: Mayor and City Council Date: May 14, 2020

From: — Ed Zuercher CO
City Manager

Subject: 2020-21 CITY COUNCIL BUDGET DECISION

The 2020-21 Proposed Budget is presented for City Council approval at the May 19,
2020, Policy session. This initiates the posting period to comply with state law and City
Charter for the formal adoption of a City budget in June and property tax levy in July.

This is a budget unlike any other in recent memory. In early March, we anticipated a
$28 million budget surplus to allocate for improving and expanding City programs. Less
than a week after release of the Trial Budget, the full impact of the COVID-19 pandemic
hit the economy and we projected a minimum $26 million budget deficit.

The Council took swift action, closing the gap on April 13 through a hiring freeze,
reduced spending on vehicles, addition of revenue from land sales and a reduction in
transfers to contingency and pension stabilization funds.

The Proposed Budget was reviewed on May 5 and is a responsible reflection of our
current financial position. In summary, it represents the cost for the exact same level of
services as approved for 2019-20, with only two additions that total $1 million (less than
0.1% of the General Fund).

We continue to monitor economic conditions, anticipating further budget cuts will be
necessary early in the next fiscal year. These cuts may be mitigated by our federal
Coronavirus Relief Fund, but we still expect some fiscal pain ahead. By July, we will
have data to examine the true depth of the economic shutdown on City revenue in
March, April and May as well as better projections on the speed of any recovery. City
management is working on budget reduction options for City Council review in the next
60 days.

In normal times, the adoption of a budget signals the end of this year’s work. In the time
of Covid-19, however, this budget adoption kicks off a new phase of data gathering,
forecasting and belt-tightening to match the new economic reality. | want to thank the
Council for your patience and guidance during this unprecedented economic situation.