Twin Cities wait to see financial effects of virus

Both Texarkanas scrutinize spending to maintain reserves

TEXARKANA — The full effect of the COVID-19 pandemic on city finances remains to be seen, but both Texarkanas’ governments are halting or taking a close look at expenditures in an effort to maintain reserve funds.

Both cities keep enough funds in reserve to cover spending for 60 days in case an emergency significantly reduces revenues. Neither has yet had to use reserve funds, but future dips in revenue because of business shutdowns are possible, and city financial officials are carefully scrutinizing spending.

Texarkana, Arkansas, is still using its standard procedure to authorize spending, but department heads are being especially careful to avoid any that is unnecessary, Finance Director TyRhonda Henderson said.

Because it takes two months for sales tax revenue to be assessed and reported, it will be some time before Arkansas-side City Hall will be able to evalu

ate any effects of the crisis, Henderson said. Sales taxes account for more than 23% of city income, according to the 2020 budget.

Other business-related revenues on the Arkansas side include Texarkana Water Utilities receipts, 23%; property tax, 7.1%; and franchise fees attached to utility payments, 5.9%.

If a significant drop in revenue necessitates spending reserve funds, the Arkansasside Board of Directors would have to approve the decision with a vote.

The Texas side has begun a spending freeze, suspending all nonessential expenditures until further notice, and employees must discuss purchases with their supervisors and department heads, Chief Financial Officer Kristin Peeples said in an email.

“We have delayed all large projects that are funded with general fund dollars in order to maintain reserves until we see the full financial impact of current events,” Peeples said.

As on the Arkansas side, it is too early to determine any effects of the pandemic on Texas-side sales tax revenue, though Peeples expects a decline, she said.

Sales tax revenue is projected to make up more than 16% of city income in Fiscal Year 2020, surpassed only by property taxes at more than 17%, according to the latest budget. TWU receipts account for 21% of total Texas-side revenue this year, and franchise fees 1.7%.

In September 2017, the Texas-side City Council approved a change in reserve fund policy. The city had been setting aside 25% to 35% of the budget for an emergency but changed to the current 60-day reserve to make more of the general fund available. In that year, the 60-day reserve fund equaled about 16.5% of the budget.