In a memo attached to the Ketchikan City Council’s regular meeting agenda, City Finance Director Michelle Johansen gave an overview of how the city’s 2021 tax revenue has been holding up in comparison to the revenue from 2020, as well as to the amounts that had been projected for 2021.

Johansen wrote that when the 2021 general government operating and capital budget was adopted, it was projected that the city would collect $11.157 million  in sales tax revenue during all of 2021. That budget was based on an assumption of a 50 percent reduced cruise season.

City of Ketchikan Assistant Manager Lacey Simpson noted at Thursday’s meeting that the cruise activity this season has been about 8 percent of the normal ship season.

Johansen wrote in her memo that, through July,  “collections to date are $1,072,052 less than projected for 2021.”

She did add, when commenting on her report later in the meeting, that it is possible that numbers could look more positive later in the year due to quarterly reporting.

“We could see a big chunk in October for the September sales tax reports, so, it’s low now, and depending on this 8%, maybe we’ll have a lot of revenue come in from those passengers who are hitting our shores,” Johansen said.

Johansen, in her memo, added that the year-to-date collections in 2021 have “exceeded the year-to-date 2020 collections by $234,644 or 4.65%.”

The city also has collected $261,917 through July in 2021 through the new remote sales tax program that collects sales taxes via online purchases, Johansen wrote. That program was instated in October 2020.

During Thursday’s meeting, Council Member Mark Flora asked for an update to the COVID-19 mitigation plan that had been adopted during the budget process to allow the city to better weather the diminished revenue expected due to the pandemic.

Simpson gave a brief overview of the plan and how it has been implemented.

“On February 4, the council had a lengthy discussion about the city’s finances in response to the prior announcement by Canada that there would be a ‘no-cruise’ ban,” Simpson said. “Cruise ships would not be allowed to enter Canada for the 2021 season. Obviously, that has since changed a bit, but with the season starting so late and with ship calls being drastically reduced, we still have, of course, this mitigation plan in place.

She said the plan was adopted at the council’s meeting of March 18.

“Staff continues to update it and monitor it,” she said, reminding council members that Flora had asked for regular updates so that the results of the plan could be reviewed and necessary adjustments could be made.

“The overall purpose of the mitigation plan was to protect the city and KPU from undue or further financial harm as a result of the COVID-19 pandemic and the revenue losses that both governments have sustained,” she said

She added, “The goal of the mitigation plan was never to fully replace revenue that was lost, but simply to hope to elevate reserves and to offset some of those losses — to essentially make the situation not worse than it already was.”

The goals for the mitigation plan vary between general government and KPU, she said. There were five areas targeted in the general government budgets: the general fund, the hospital sales tax fund, the public works sales tax fund, the Commercial Passenger Vessel fund and the port enterprise fund. Under each of those, a stated financial goal was established based on revenue projections and the adopted 2021 budget.

“These are moving targets as revenues fluctuate, as costs go up and go down, and every month or so the finance director delivers a report to the council that sort of highlights where we’re at,” Simpson said.

For both KPU and general government, Simpson said that goals were achieved “by a number of factors,” including personnel freezes and capital projects deferments. She also mentioned several revenue sources that have helped, including a legislative grant and federal American Rescue Plan Act funds.

She pointed out, however, that “there’s no amount of revenue at this point that the city could hope to receive from outside sources to replace what we have lost in the past 18-plus months.”

Of the budget outlook, Simpson said, “this is still a moving target.”

She mentioned a $2 million donation from Norwegian Cruise Lines to the city, noting that it has not been allocated yet, as staff had been waiting to see how much ARPA money the state would deliver to the city.

In reference to the health of the KPU budget, Simpson said there still are accounts in arrears, which causes that budget to be a “very volatile, very highly changing” aspect of KPU’s revenue sources.

Johansen said, in her report, that the numbers for KPU “actually are looking a little bit better than expected.”

She explained that because it is unknown how much more financial aid will be offered to individuals, it’s difficult to know how fully customer accounts will be paid in the coming months.

Johansen said that the first ARPA grant funds allocation has been received by the city. In a memo she wrote that the city was awarded $1,999,693, to be delivered in two payments. The first payment of $999,846.67 was delivered on Aug. 13. The second payment will be distributed “no earlier than 12 months,” Johansen wrote in a memo.

During Thursday’s meeting the council unanimously approved a resolution that allowed the funds to be placed into the city’s general fund. That resolution also included a transfer of $407,000 to the Public Health Department. That money was provided by PeaceHealth in line with an agreement made earlier with the city that PeaceHealth would pay for a necessary window wall replacement at Ketchikan Medical Center.

City of Ketchikan Mayor Bob Sivertsen noted toward the end of the discussion that even with a budget that looks like it’s holding steady right now, there are huge capital projects such as a $15 million cathodic protection project on the port that still need to be funded.

“The fact is, we’re still in the hole and we are shored up by federal monies and when that money runs out, it’s going to be unknown what that effect is going to be and what we’re going to look like in that particular point in time,” Sivertsen said.

He added, “I think earlier on, when we made our projections and we talked to the state, we were looking at a shortfall of about $33 million, and I don’t think that that has changed much.”

The city has had to rely on reserve funds to stay afloat during the pandemic, he added, so that also must be kept in mind.

“The capital projects are probably one of the things that went first in regard to trying to get some cost savings,” Sivertsen said.

Council Member Janalee Gage suggested that city staff work with Deborah Hayden, a local who spoke during the public comment portion of the meeting to ask that the city work with her nonprofit organization “Grow Ketchikan” to apply for federal grants to support municipal budget needs.

The council members had agreed via a four-hands vote to direct Simpson to discuss grant-seeking options with Hayden.

Sivertsen concluded that he was “hopeful” that the city would be able to secure funding from the variety of sources available.