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Fredericksburg Faces $2 Million Shortfall, But Increased Tourism Might Help

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Courtesy Oktoberfest
Fredericksburg may see an increase in tourism as out-of-state travel falls out of favor with big city and metro area residents.

The City of Fredericksburg’s annual operating budget is $70 million. Like many municipalities around the state, the city now faces a funding gap. 

“Right now we're predicting about a $2 million shortfall,” said city manager Kent Myers. 

Revenue is down across the board. 

“The three major (revenue) sources are sales tax, hotel tax and our parks fees,” he said. 

The primary revenue stream is the sales tax, and the loss of that stream is responsible for half of the projected $2 million hole. Projected lost hotel occupancy revenue accounts for approximately $700,000. The city also lost park revenue after seeing fewer visitors in recent weeks and closing a public RV park.

But those projections could change if tourism picks up. 

“Yeah, there's a lot of discussion about that possibility here in Fredericksburg right now,” Myers said. “We had a very busy weekend this past weekend.”

He said residents of metro areas who might be reluctant to fly out of state or spend their free time in populated areas are coming to Fredericksburg instead. 

“That could open some new opportunities for us as far as increased tourism,” he said. “And so, it's still an unknown, but we do consider that to be a real possibility — that long term, we could see an increase in tourism as a result of the coronavirus.”

The city has posted signs asking visitors to maintain social distancing measures and to wear masks. Gillespie County has at least four confirmed cases of COVID-19, and they hope to avoid a surge. 

“There are concerns that with the influx of visitors, they could cause an uptick in our number of cases here,” he said.

But even with those busy weekends, expenses have to be cut to make up for lost revenue. Sidewalk construction, street maintenance and unnecessary travel by city officials have been reduced or eliminated. A project to build a bathroom at a park is now scrapped, and the city is exploring departmental cuts. 

“One of the areas that cities always take a look at during times of budget cuts -- it's kind of unfortunate, in a way — is parks and recreation — those are not considered to be essential services,” Myers said. “And so, for example, we've identified about $400,000 this year that we cut out of our parks budget.”

Myers said the parks and rec department along with maintenance will continue to be looked at for possible cuts as the city starts budgeting for 2021. 

He said a reserve fund of $7 million should provide some wiggle room, and that lost sales tax revenue for March was less bad than expected. Myers said tax revenue was expected to take a 25% hit, but only fell 10% below pre-pandemic projections. April was the first — and only — full month of business closures, so sales tax could rebound more quickly than expected.   

Dominic Anthony Walsh can be reached at Dominic@TPR.org and on Twitter at @_DominicAnthony.

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