COVID-19 Revenue Losses May Move to Future Years

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CAPE MAY – During a financial presentation to Cape May City Council, Chief Financial Officer Neil Young said operating deficits brought on by the COVID-19 crisis can be spread over up to five subsequent budgets as a deferred charge. 
The state offered this capability to help off-set budget crises in municipalities that saw significant revenue losses or additional expenditures due to the health crisis.
Young indicated that the city’s current fund budget is in a good position to finish the fiscal year without a deficit. The same, he said, is true of two of the city’s three self-liquidating utilities, where expense reductions have kept up with revenue losses.
Young indicated that the city may have to use the new state flexibility for an expected deficit in the water/sewer utility where usage dropped dramatically in the spring as hotels, stores, and restaurants were forced to close due to the pandemic. 
With the largest items of expense in the utility’s budget being debt service and payments to the county Municipal Utilities Authority, the same ability to control expenses did not apply.
“The fixed costs needed to be paid,” Young said, adding that reductions in the small staff were not possible because “people need water.”
Young explained that the way the deferred charges would work is for every $100,000 of a 2020 deficit that is pushed forward to future years, $20,000 would have to be “paid back” during each of the next five years.
Young indicated that a rate hike is probably unavoidable for the utility’s customers.