Eureka Springs is struggling to cut 35% out of its 2020 budget.
The pandemic hit right at the beginning of tourist season.
"When the tourism and hospitality industries shut down, our budgets shut down," said Mayor Robert "Butch" Berry.
Berry said the pandemic kept tourists away for about six weeks. He said tourism started picking up again over the weekend of Memorial Day, which was May 25.
"I'm encouraged," he said.
The city's sales tax revenue for March dropped by 18.3% when compared with March 2019. April numbers should be available later this month, but Berry isn't optimistic.
"That's the month that's going to make us or break us," he said.
Pandemic-related closures and travel restrictions that significantly affect the tourism industry were in place for part of March and all of April.
On March 20, Gov. Asa Hutchinson issued a directive closing bars and restaurants for dine-in services, but allowing take-out and delivery. On April 4, the governor banned out-of-state travel to Arkansas for recreational purposes.
In recent weeks, Hutchinson has been reopening the state's economy, but restaurants and bars are limited to 33% occupancy for now.
The effect of the closures is even more pronounced when looking specifically at restaurants, bars and hotels.
The Eureka Springs City Advertising and Promotion Commission collects a 3% tax on lodgings, food and beverage sales.
Rick Bright, finance director for the commission, said March sales tax collections on those things plummeted 44.1% from the previous March.
"It's looking like we're probably going to be down about 80% in April," Bright said.
Eureka Springs' budget for 2020 was $10,803,153, said Kim Stryker, the mayor's assistant. The city collects 2% in general sales taxes. Those taxes brought in $2,316,963 last year.
Stryker said some expenses are "front-loaded" in the first quarter of the year. But then the tourist season starts in spring and the revenue makes up for it.
"The boat always drags the bottom coming out of the first quarter," Stryker said. "We always come through the first quarter with the general fund in arrears."
Berry said he instituted a hiring freeze when the pandemic began. The mayor said he didn't want to lay off any city employees.
On May 11, Berry went before the Eureka Springs City Council with three proposals: cut the budget by 30%, 50% or 70%.
The council came back with its own number: 35%.
Berry asked department heads to cut what they could from their budgets. Then he and Lonnie Clark, the city's finance director, made additional cuts. They came up with 22% in cuts to the overall budget, Stryker said.
The proposed budget was submitted to the City Council on May 25, but some council members objected, in particular, to cuts of 20% in salaries for the Fire Department and emergency medical services.
"None of the council really cared for fire and [emergency medical services] absorbing a 20% cut," Berry said. "They are an essential service. The fear is, cutting them, they might just quit and go somewhere else. We worked really hard to get their salaries up to compete with surrounding areas."
Alderman Terry McClung asked Berry and Clark to rework the budget with a 6% cut for all employees. Berry said the new proposed budget is to be presented to the council at its next meeting, which is Monday.
"I don't think it'll hit 35% even with the 6% cut," Clark said.
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Berry said there's a two-month lag between the time the sales taxes are collected in Eureka Springs and when the state provides the city with money from those taxes.
"The sad part is by the time we have to adjust for the decline in sales tax is when we start needing those services again because we have people coming back into town," Berry said. "How can we survive and not provide minimal services."
Bright said Eureka Springs has been bustling lately. He and his wife run a bed and breakfast called Eureka Downtown Suites, which has three suites and can accommodate 12 guests.
"We had guests the first two weekends of March," Bright said. "But after the second weekend of March, we didn't have anything until Memorial Day weekend. We were full for three nights over Memorial weekend and full two nights last weekend."
Bright said some shop owners indicated that business was up recently.
"The last two weekends have been great," he said. "The shops, everybody says they've been having great sales. We're different from everybody else. We're nothing but tourism."