Baltimore will be able to close out its 2021 budget without using the city’s rainy day fund, instead relying on federal aid to cover more than half of a $142.7 million deficit incurred due to coronavirus spending, city budget officials announced Thursday.
Officials previously feared they would need to draw millions from the reserve fund to close out the fiscal year that ends June 30. In the previous fiscal year, pandemic-related spending forced the city to withdraw $8 million from the fund.
Baltimore law requires the city to end the year with a balanced budget.
To help close the current deficit, city officials said they will use $51 million from the federal American Rescue Plan, the first allocation to be publicly announced for the money promised to Baltimore in March. Unlike previous coronavirus relief packages offered by the federal government, ARP money can be used to directly plug a hole in the city’s budget, Budget Director Bob Cenname told City Council members at a meeting Thursday.
Also, Baltimore’s initial allocation from the ARP was recently reduced, based on the city’s population, Cenname told council members. City officials were initially told they would receive $670 million; that figure has been lowered to $641 million.
The money was included in Democratic Mayor Brandon Scott’s proposed 2022 budget, although no plan for the funding was outlined when the council received the budget last week. The council has budget hearings scheduled for next week.
The city expects to receive another $34.1 million from reimbursements by the Federal Emergency Management Agency by June 30 for coronavirus-related spending in 2021. FEMA money helps to pay for the city’s pandemic food distribution program, as well as a homeless shelter in the Lord Baltimore Hotel.
Cenname said the city has been “superaggressive” in pursuing FEMA reimbursements, and is seeking additional funding for other hotel shelters it’s operated during the pandemic. Baltimore hired accounting firm Ernst & Young to assist with such applications.
Currently, FEMA is reimbursing 100% of the cost for approved coronavirus-related expenses, but that reimbursement rate is set to drop to 75% as of Sept. 30, Cenname said.
Democratic Councilwoman Odette Ramos praised the city for “taking the risk” of spending money on coronavirus relief for residents upfront in anticipation of reimbursement from FEMA, calling it the “right move.” Ramos said that the city will have “hard decisions” to make as that September date nears about how to fund the shelters.
“There will be hard decisions to make on that,” Cenname said. “The financials will be part. The health and the risk will be the other part of it.”
In addition to incurring millions in expenses related to the coronavirus, Baltimore’s revenue also fell $20 million short of “very pessimistic” expectations in the fiscal year 2021 budget, Cenname said, contributing the city’s deficit.
Parking and hotel tax revenue were hardest hit. Before the pandemic, Baltimore averaged $7 million per month in parking revenue, but in 2021, the city realized only $3.1 million per month. The result was a decline of $50 million in revenue, Cenname said.
Democratic Council Vice President Sharon Green Middleton asked whether parking revenues could be expected to recover as more visitors return to the city. Cenname said receipts are expected to increase as tourism rebounds, but revenue from commuters may never recover, as working from home remains a trend, he said.
“I’m skeptical we’ll ever get back to pre-COVID numbers,” he said. “We’re not going to see those garages as filled as we used to.”