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Manager’s Message Return to Table of Contents
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INTRODUCTION

Resilience in Overcoming Adversity
As the FY 2021 budget was being developed during the spring and summer of 2020, the City’s revenue and expenditure outlook
for FY 2021 was approached with considerable caution due to uncertainty about the severity and duration of the COVID
pandemic. At the time, projections for FY 2020 showed revenues under budget in the General Fund by as much as $18 million,
with over $13 million of that amount attributable to the loss of sales tax revenue. Strict expenditure controls were implemented
to constrain spending for the duration of FY 2020, and the FY 2021 budget was prepared in anticipation that revenues would be
depressed throughout the coming year, with full recovery likely to be two or three years away.

One year later, the economic news for the City has much improved. The projected revenue loss of $18 million in FY 2020 was
substantially less than predicted; the General Fund finished FY 2020 under budget in revenues by $10.7 million, with $4.2 million
of that loss coming from sales taxes. On the expenditure side, the spending controls achieved their targeted reduction of $18
million in lower spending. This variance, along with the release of $3.1 million of prior-year encumbrances, provided an
opportunity to increase support for the Convention & Event Services Fund ($3.2 million more than budgeted), and set aside an
additional $6.1 million for use in future years.
Financial improvement has continued throughout FY 2021. Sales tax revenues have rebounded better than our most optimistic
projections would have indicated. Our budgeted sales tax revenues in FY 2021 were $61.6 million; our most recent estimate
shows revenues of $69.9 million, or $8.3 million higher than budget. As shown in the Comprehensive Financial Forecast
presented to Council in April, we did not expect to reach sales tax revenues approaching $70 million until FY 2025. This
resurgence provided the opportunity to relax the spending controls that continued in place through the first half of FY 2021.

In addition to the improving revenue outlook, the American Rescue Plan Act of 2021 (ARPA) provided the City with approximately
$81 million to be invested over three years (by the end of calendar 2024). Of this amount, the City plans to use two thirds
(approximately $54 million) to fund City priorities, with the remaining one third available to provide support for future initiatives.
A total of $6.1 million of this funding was allocated to the General Fund through the recent budget amendment approved by
Council for FY 2021 to address the compensation adjustments that were deferred due to the COVID pandemic. The ARPA funding
supported the 2 percent employee compensation adjustment that was suspended in the spring of 2020. The additional funding
also provided the resources to remove the hiring freeze that was put in place at the outset of the pandemic in the spring of 2020.
Although the economic climate has notably improved, cautious optimism has remained the guiding principle during the
development of the Proposed Budget for FY 2022. As recent news has highlighted, new variants of the coronavirus are
increasing in certain areas of the country, particularly those where vaccination rates are below national averages. The delta
variant is cause for concern as schools reopen in the fall, since it appears to affect younger people at higher rates than previous
strains of the virus. Complacency in assuming the pandemic has completely run its course would be premature. However, our
resilience and willingness to quickly adapt in the face of adversity has resulted in opportunities to successfully rebound from one
of the most severe economic challenges the City has ever faced.

EXPANDING ON SUCCESS, PLANNING FOR THE FUTURE

Restoration of Spending Reductions Implemented in 2021

The sudden economic downturn in FY 2020 prompted steps to constrain spending for the remainder of that year and well into
FY 2021. The recent resurgence of sales tax revenue, a surprisingly strong July 2021 certified tax roll that shows assessed
property values in the City up by 5.9%, and the federal funding available from ARPA provide the opportunity to restore most of
the expenditure cuts that were made in FY 2021. A total of $7.2 million has been restored to the FY 2022 operating budget,
which includes unfreezing vacant staff positions and the addition of budgeted expenditures for supplies, maintenance, travel

FY 2022 Adopted Budget and Business Plan iii City of Arlington, Texas