City Council Meeting - FINAL


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  10.B.       
Meeting Date: 01/04/2022  
From: Rick Tadder, Management Services Director

Information
TITLE:
Consideration and Approval: Revised Economic Recession Plan
STAFF RECOMMENDED ACTION:
Review and approve the revised Economic Recession Plan.
Executive Summary:
On April 21, 2020, Council approved the City of Flagstaff's first Economic Recession Plan (the Plan).  The City utilized the Economic Recession Plan during the 2020 recession and during part of the Covid-19 Pandemic when we were evaluating projected losses in revenues due to the events.  The City moved into the Significant Stage of the Plan in May 2020 and remained in that stage until February 2021.  The Budget Team utilized the plan to make financial decisions during these events. 

In October 2021, the Budget Team took the opportunity to review the Plan based on what we learned during the utilization of the plan.  The Budget Team is recommending changes to the Plan to address three areas: 1) A higher focus on operating expenses versus capital improvement projects, 2) A higher focus on the General Fund as it has the largest operating budget in the organization, and 3) Invest additional funding strategically to offset impacts of a recession.  The revisions to the Plan were presented to the Council on December 9, 2021, at the Council's Budget Retreat and the Budget Team is looking for approval. 
Financial Impact:
The Recession Plan is a tool that should enable the City organization to anticipate and adapt to declining economic conditions.  As such, its budgetary impact will, by its very nature, be negative.  The intent of the Plan is to minimize this impact and better prepare the organization to operate effectively and provide essential services to this community during periods of declining revenues. 
Policy Impact:
The Economic Recession Plans serves as a guiding document during economic downturns. 
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
While this Recession Plan may have application several Key Community Results, the most notable falls under High Performing Governance:  Enhance the organization's fiscal stability and increase efficiency and effectiveness.
Previous Council Decision on This:
April 21, 2020: Council approved the Economic Recession Plan. 
December 9, 2021: At the December Budget Retreat, staff presented amendments to the Economic Recession Plan.
Background/History:
The Budget Team began working on an Economic Recession Plan (Plan) since October 2019.  The Plan is modeled after a similar tool that has been implemented in another jurisdiction (and applied during the Great Recession).  As such, it does have some history of success. It has been tailored specifically to the City of Flagstaff. While much effort and analysis has been placed into the development of the Plan, it is relatively simple in scope.

The Economic Recession Plan was Adopted by Council 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 serves as the working body to evaluate the economic indicators and recommend the correlating remedial measures. 

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.
Community Benefits and Considerations:
The City of Flagstaff community benefits from an Economic Recession Plan as we can take measures to sustain valuable services during economic downturns. 
Attachments
Revised Recession Plan
Redline Version of Revised Recession Plan


    

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