Consideration and Adoption of Resolution No. 2021-08:  A resolution of the Flagstaff City Council, directing the City Manager to reduce the stage of the 2020 Economic Recession Plan from the Significant to the Moderate, and providing for an effective date

At the February 1, 2021, Council Budget Retreat staff provided City Council (“Council”) an update on revenue projections for the fiscal year 2020-21. Estimates provided have demonstrated the City is projected to fall within the Moderate stage of the 2020 Economic Recession Plan (“Recession Plan” or "Plan") for the fiscal year 2020-21.  On May 26, 2020, Council adopted a resolution to move into the Significant stage based on revenue estimates at the time.  A resolution is required to move back to the Moderate stage of the Recession Plan.  At the above referenced Retreat, Council directed Staff to prepare a resolution that it could consider that, if approved, would bring the organization back into the Moderate Stage of the Recession Plan.  This resolution has been prepared and is being presented to your for your consideration.

The adoption of this resolution will move the City to the Moderate stage of the Recession Plan and allow the City Manager to implement action items within that stage. The fiscal impact will align with strategic reductions of expenditures to mitigate estimated revenue reductions.

The 2020 Economic Recession Plan allows the City Manager to manage future expenditures within the available revenue resources.

High Performing Governance:

• Enhance the organization’s fiscal stability, and increase efficiency and effectiveness
• Implement innovative local government programs, new ideas and best practices; be recognized as a model for others to follow

On April 21, 2020, Staff presented to City Council the Economic Recession Plan and the Council chose to adopt the Plan.
On May 26, 2020, Council adopted Resolution No. 2020-33 which moved the City into the Significant stage of the Plan.
On February 1, 2021, Staff presented to the City Council a revenue and Recession Plan update. 

• Approve the resolution as submitted.
• Do not approve the resolution and remain in the Significant Stage of the Recession Plan

The Budget Team began working on an Economic Recession Plan (Plan) in October 2019. The plan was advanced for Council Adoption on April 21, 2020. The Plan is based upon an incremental application of five progressive, remedial action steps (stages). The first stage is relatively minor, while the fifth and final stage presupposes a crisis situation. The intervening stages become progressively more impacting, as declining revenues worsen. The Plan is intended to be proactively applied, utilizing economic forecasts and indicators as enumerated. Notably, formulation of the Plan commenced during healthy economic times, well in advance of the current pandemic and its resulting economic downturn.
 
Procedurally, the Plan is a tool that can be considered and implemented at the administrative level during the early stages of a recession or economic downturn (first two stages), with Council action being required for more stringent measures (third, fourth, and fifth stages). The Budget Team, comprised of members of Management Services, City Manager's Office, Human Resources, Economic Vitality, and the Employee Advisory Committee, serves as the working body to evaluate the economic indicators and recommend the correlating remedial measures. While the formulation of this Plan was conducted through members of the Budget Team, transparency of the process was achieved through presentation before the Leadership Team, Extended Leadership Team, and the Employee Advisory Committee.
 
This Plan is formulated to endure the test of time, utilizing a sliding-scale approach to both its implementation and suspension as necessary. This is important to allow for the necessary fluidity to changing economic situations. The current pandemic, with its rapid spread, uncertain severity, and unknown duration, illustrates the need for this adaptiveness.

At the February Council Budget Retreat, staff provided updated revenue estimates for all operating funds.  The information demonstrated that all fund types are estimated to be under an estimated 5% revenue loss this fiscal year.  Further funds are making the operational expediture reductions to manage with these estimated revenue losses. 
  

Fund Types	FY 2020-21 Budget	FY 2020-21 Estimate	Change from Budget	Percent of Change
General Fund	$ 62,478,118	$61,468,780	($ 1,009,338)	- 1.6%
Special Revenue Funds	$ 50,816,498	$ 48,481,370	($ 2,335,128)	- 4.6%
Enterprise Funds	$ 51,166,184	$ 48,850,966	($ 2,315,218)	- 4.5%
All Operating Funds	$ 164,460,800	$ 158,801,116	($ 5,659,684)	- 3.4%

If the Council approves moving from the Significate stage to Moderate stage of the recession plan, several objectives will still remain such as continued review of large capital expenditures and postponement of discretionary travel and training.  The Moderage stage will allow the City to implement the 2% Cost of Living Adjustment (COLA) as well as positions may be delayed versus a freeze on non-critical vacancies.