It has now been nearly a month since the implementation of social distancing and Gov. Doug Ducey’s decision to close some businesses, and the economic impacts are already felt. Businesses have closed, workers have been sent home, and many of those companies that have managed to stay open have seen huge drops in their business. With the Verde Valley especially reliant on tourism for much of its commerce, the hit has been felt hard.
Beyond the impacts on local businesses, a drop in sales has also meant a cratering of sales tax revenues. With all major Verde Valley municipal governments receiving the bulk of their revenues through sales tax, falling sales have also meant huge holes in the budgets of the towns in the area.
“We’ve already put a hiring freeze on,” Clarkdale Town Manager Tracie Hlavinka said. “We’ve already done away with discretionary budget expenditures, so we’ve got a threshold right now. Anything over $500 has to get approval from myself and the finance director, because we’re trying to sustain whatever it is that we can out of this budget year before next year. Our commitment — as a town manager and according to several of our council members — our capital asset is our employees.
“The fact that we have such a small organization, so many employees are a benefit by being able to do so many different things — it’s not something we want to forego, because when this is all said and done, we’re going to need those employees.”
Hlavinka said that Clarkdale is anticipating a potential drop of 15% to 20% in its tax revenues for the month of April and is worried that the slump could affect not just this year but future budgets as well.
“We are expecting the impact to be substantial and are discussing how this situation affects the current as well as next year’s budget,” Cottonwood Deputy City Manager Rudy Rodriguez wrote in an email. “Besides planning for the impact on our fiscal situation, we are looking for ways to help businesses and individuals during these difficult times.”
According to Camp Verde Town Manager Russ Martin, while Camp Verde is also feeling the sting of lost revenues, the town has developed some reserves in its budget that he hopes will allow it to survive the slump without having to cut services too much.
“With the reserve, we have some time before we make drastic changes,” Martin said. “That’s what the reserves are there for, to maintain levels of service.”
Martin said that revenues in 2020 before the crisis had actually been up, which had meant the town hoped to use some of those reserves on projects, but now will have to spend the money on just maintaining the town’s government as normal.
“Until we get the cash in hand, we wouldn’t take on a project until we see revenues that cover our expenses,” Martin said. “It’s going to be hoping for the best and getting plans in place, but if the worst comes, then those plans can be put on the shelf.”
Similarly, Sedona, while anticipating a massive shortfall in its budget, is banking on reserves to help it through the downturn.
“We’ve set ourselves up really well and have said for years that if we had a recession or something like it we’d be prepared,” Sedona City Manager Justin Clifton said. “I’m not saying it’s going to be easy, but frankly, we’re probably in a better position, relative to our size, than any other community I know about.”
According to local officials, this downturn does come with some silver lining when compared to the 2008 crash, which wrecked municipal budgets, in that unlike last time,
construction has not halted yet, meaning that there is some continued employment and some continued revenues from sales taxes due to construction purchases.
With budgets facing these holes, local officials say that a possible federal bailout — currently being argued about in Congress, with no guarantee of it actually happening — could make a difference in preventing cuts to payroll and other expenses.
“Right now, we don’t know what those relief packages would look like,” Hlavinka said. “We hope that there will be a relief package that comes out, maybe in May.”
