Flagstaff had been operating in the “significant” stage -- which is the third stage in the five-stage scale -- of the plan since May of last year

City staff cited an optimistic revenue outlook as they recommended dropping to the second stage. Recent projections estimated the city’s total revenue loss at 2.9%.

The significant stage exists to limit city expenses when total revenue loss falls between 5% and 10%. The aggregate of city funds is “well under” a revenue reduction that would place the city in the significant stage, Rick Tadder, management services director, said.

Revenue losses, such as that of the general fund, would have to project above the 5% threshold to trigger a conversation to move back to the significant stage.

“I am very, very thankful that the situation is not as dire as [myself] and others may have originally expected,” Mayor Paul Deasy said.

The current reduction of the recession plan results in a few changes to the way the city operates. For instance, the move allows the city to implement both deferred personnel changes and the Cost-of-Living Adjustment -- which was budgeted for last year and will increase personnel pay by 2%. It also allows the city to move from a recruitment freeze to a delayed hiring of new positions.

Still, some practices are expected to remain the same, and Tadder told Council that staff will continue to review large expenditure requests, along with an ongoing postponement of discretionary travel and training.

City budgeters recommended that Council reduce the stage earlier this month after providing a short update on the recession plan. The discussion took place on Feb. 1 during the second of three planned budget retreats heading into fiscal year 2021-22, where councilmembers were presented with a comprehensive overview of the annual budget and updated revenue projections.

“Things appear to be in a better position than we thought early on in the pandemic,” Tadder told Council during the budget retreat.

City Manager Greg Clifton described a level of confidence in reducing the stage that had taken members of the budget and finance teams months to reach. Even in “the most conservative” estimates related to the city’s budget, Clifton said, staff felt the move was warranted.

“If there’s anything here that we would like to emphasize that should resonate in all the discussions this morning, you’re looking at it,” Clifton said at the budget retreat.

Council unanimously passed the recession plan in April of last year, preparing the city to navigate both the current economic downturn and those in the future.

The plan’s different stages exist to govern city expenses in the case of both marginal or large reductions in revenue. Stages of action can be implemented based on how revenues have dropped in the general fund as well several other factors.