Photo: Patrice Garvin, Belmont Town Administrator

It’s ugly. And it’s likely to get uglier.

That’s the first impression of Belmont’s town finances after initial estimates of the impact on the current and next year’s budgets by the COVID-19 pandemic, according to Town Administrator Patrice Garvin speaking before the Warrant Committee via video conference on April 1.

With all town departments already “running lean” before the pandemic struck “another cut is going to severely impact the operations and the services we provide the residents of the town,” said Garvin.

While there are “too many uncertainties” to make any good estimates of the likely shortfall, it’s nearly certain that the anticipated pronounced loss of revenue will place a strain on the current fiscal year 2020 budget while triggering real pain in next year’s fiscal 2021 budget – which begins July 1 – from lose of basic government services and likely layoffs and furloughs of town workers, according to Garvin.

“Direr but probably realistic,” said Warrant Committee Chair Laurie Slap hearing members reiterate their belief that revenues will drop significantly with resulting cuts in expenditures.

The sudden shut off of the revenue spigot comes as the town was close to finalizing the fiscal ’21 budget that was going to be brought before Town Meeting by the Select Board. The last draft presented to the Warrant Committee, the Town Meeting’s financial “watchdog,” projected the ’21 budget at $136.6 million.

For instance, a 10 percent cut in just one line item, total state aid in fiscal ’21, would force the town to slash $1.2 million from the budget that has a revenue gap of $5.6 million. Garvin noted state aid was reduced by 20 percent between 2008 and 2009 when the last economic downturn occurred.

The town is currently looking back at town budgets in 2008 and 2009 when the country last entered into recession to get an idea of how revenues took a hit.

Override in doubt?

In addition to services, Belmont, according to Select Board Chair Tom Caputo “will need to think long and hard about whether or not … our plans for an override in November still, in fact, make sense.” The proposed “operational” override – in the $6 million range – was seen as critical in meeting town services and needs by the school district in managing a continued surge in enrollment.

The rapidly moving series of events of the past six weeks due to strategies to halt the spread of the coronavirus has Garvin and her staff attempting to hit a moving target to provide the Warrant Committee some semblance of confidence it is receiving figures it can analyze.

When the seriousness of the spreading pandemic was fully understood two weeks ago, “we quickly came to the realization that fiscal year ’21 and some of fiscal ’20 could be severely impacted” most notably by the loss of state and local revenue, said Garvin.

Now and moving forward, the town has been “scrambling” to review its revenue projections from its February budget estimates, said Garvin.

Caputo said the massive disruption in the economy from the coronavirus requires the town “to rethink our [fiscal] ’21 budget that we laid out several months” which “was one that was going to work if everything remained as we had hoped” before the COVID-19 virus caused commerce and life to be upended.

While the largest sources of revenue, real estate property taxes with an estimated revenue of $92.2 million in fiscal ’21, continue to show high compliance levels, the town is preparing for significant reductions in the aforementioned state aid and local revenue collected from fees and services.

In a four-page overview of the ’21 budget, the town has been working on, the majority of line items are color-highlighted as likely to experience a drop in revenue.

Areas where revenue numbers will shrink from the February earlier estimates will be in new growth (expected at $920,000), meals ($234,000) and excise taxes ($3.7 million) and as will parking tickets and fees from building permits. The Recreation Department was seen as generating $1 million into the town’s coffers yet now could see receipts plummet if the Underwood Pool can not open for the summer recess.

While many of the fees are relatively small – from a few thousand to over a million dollars – if each takes a significant hit, they will add to a larger deficit in the fiscal year ’21 budget projections.

“In a nutshell, [fiscal year] ’21 is just a work in progress,” said Garvin. “We’re going to just keep running different scenarios … and seeing where the [Select] Board and the Warrant Committee wants to go.”

Warrant Committee member Ellen Schrieber noted that losses in fees and other revenue in the current year will likely damped estimates of the number of reserves – mostly from the town’s free cash account – which was expected to be passed forward into fiscal ’21 to fund gaps in the budget.

Garvin agreed, saying free cash “is where we’re going to get the hit next year.”

Hiring Freeze, Layoffs Possible

While the budget outlook is far from clear, the town is already formulating “initiatives” to begin filling the gulf of red ink facing the town. The likely first step will be a “thoughtful” hiring freeze, according to Caputo, as well as keeping a cap on overtime payments with the exception of public safety and a possible town-wide spending freeze with only “the most critical and essential items.” according to Garvin.

One significant area the town and Select Board are “brainstorming” to reduce expenses is looking hard at salaries which is the “primary” expenditure in the budget, said Caputo.

Warrant Committee member Geoffrey Lubien breached the topic of possibly furloughing town employees, noting that while not ideal, it would allow those individuals to secure unemployment benefits.

Garvin said that such conversations are occurring with the Belmont town counsel as nearly all the employees are union-represented and there needs to “decipher” the difference between a furlough and a layoff.

Lubien did followup saying reducing the workforce should be a last resort since “to let people go and then try to get them back is very difficult.”

One area of town that was only briefly touched but which looms large in town finances was schools. Yet Warrant Committee member Chris Doyle was blunt on her view that significant savings should come from the district that she believes isn’t functioning at full capacity with the schools closed and students being taught remotely.

“There is zero chance that teachers are spending anywhere close” to the same time they were in school “and it makes me want to be very encouraging for a broad furlough in the school department,” said Doyle.

Mike Crowley, the school committee representative to the Warrant Committee, felt layoffs “isn’t going to help the kids” during a difficult and at times problematic transition from educating students in a classroom setting to one at home in front of a computer.

The town is also discussing the possibility of using a provision in Gov. Charlie Baker’s Declaration of Emergency which allows municipalities to run a budget deficit due to “natural disasters on direct coronavirus expenses” The law gives a city or town breathing room to recover from a calamity by allowing the deficit to be paid off over the subsequent three fiscal years.

But for now, Garvin will be meeting with department heads and the school district to discuss where cuts can be made in an already lean program while waiting for more information from the state and town.

“There’s a lot of uncertainty and we’re just kind of moving along, keeping our eyes on what we think is going to be most impacted and go from there,” said Garvin. “I could put something together for today and a month [from now] it could be completely different.”