Pandemic wasn’t as tough as possible on Sioux Falls city finances in 2020

KELOLAND.com Original

SIOUX FALLS, S.D. (KELO) — The city of Sioux Falls finished 2020 with more revenue and fewer expenses than expected.

Although federal CARES act money has provided the city with additional reserve fund money, even without it the city was able to increase its reserve fund to 35% of a year’s operational budget.

“You could make an argument that we are in the strongest financial position we’ve been in a (years),” said council member Greg Neitzert said.

Sioux Falls closed the year with a healthy reserve balance, paid down debt and had fewer expenses than anticipated during a 2020 coronavirus pandemic year. But there were declines in sales and use tax and in the entertainment tax revenue, which were caused in large part by the pandemic, city finance director Shawn Pritchett said.

City of Sioux Falls chart.

Pritchett presented the 2020 financial results in an afternoon informational meeting on Monday.

Council member Rick Kiley said although there was a 13% decrease in entertainment tax revenue, the revenue during 2020 was at the 2015 level.

“I still think that’s pretty amazing,” Kiley said of the 2015 level in entertain tax revenue.

One big reason why the city had a stronger than anticipated 2020 was, “The relative opening of our local economy compared to other parts of the country…,” Pritchett said in an interview with KELOLAND News.

The CARES Act money for eligible expenses made a difference in the city’s budget and it will have an impact in 2021. Pritchett said during the informational meeting that the CARES Act money can be used for a variety of projects and expenses.

Council member Curt Soehl said he did not want the public to think the city was using CARES Act money for whatever it wanted. He said it should be explained that the CARES Act money has been spent on qualified expenses and the city would technically be using its own money in the future.

Pritchett said Soehl’s description would be correct as the city has already paid for expenses that have qualified for CARES Act money.

But the CARES Act money has allowed the city to pay $25 million toward debt. And allowed the city to carryover about $40 million toward future proposed projects in 2021.

Two areas that show the negative impact of the pandemic are the sales and use tax revenue which declined by 0.7%

City of Sioux Falls chart.

The city had “projected a 4% increase over 2019 revenue,” but that was before the pandemic, he said.

When the pandemic hit in March of 2020, the city expected a more substantial decrease in sales tax revenue, Pritchett said in an interview.

“It was certainly much better (than originally projected),” Pritchett said of the 0.7%.

But the entertainment tax did about as poorly as expected.

About 50% of the revenue from the entertainment tax comes from restaurants. Another large chunk comes from hotels.

Pritchett told the council that while tax revenue from restaurants improved throughout the pandemic, the hotel industry is still lagging far behind.

City of Sioux Falls chart.

The general fund also illustrates the unusual year of 2020.

Expenses were originally projected at $117.1 million and finished at $167.7 million. When CARES Act money is included, expenses were at $192.9 million.

Revenues were originally projected at $174.4 million and finished at $175.6 million. When CARES Act money is included, revenues were at $223.3 million.

The city had reductions or reached budgeted expense amounts in every department in the general fund.

The city did not open pools so it did not hire lifeguards or seasonal help in other areas.

Vacated positions were not filled in other areas, Pritchett said in an interview.

In his interview, Pritchett said that some cities or local governments had to take a different path than Sioux Falls because of the uncertainty of the pandemic and because of their response to it.

Some other cities or local governments needed to make cuts or lay employees off because their financial conditions going into the pandemic were not as strong as Sioux Falls, he said.

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