Tax and other revenue numbers in Key West over the summer and into the fall show unexpectedly strong growth, indicating the city on some levels has not only recovered to pre-COVID-19 levels but, in certain cases, surpassed them.

Parking, sales tax and rent revenue from tenants at city-owned properties all show significant gains from the COVID-impacted lows in April and May of last year, when Key West and the Florida Keys were shut down to tourism traffic from the mainland. And in September and October, revenue from those three tax buckets actually exceeded monies collected in the same months in 2019, mirroring the surge in visitors seen on Duval Street this past fall.

“Barring any complete reversal of where you see the economy trending currently, we should be well on track with the budget and probably tracking a little better,” Key West Finance Director Mark Finigan recently told city commissioners about financial projections made in the current fiscal year 2022 budget that were based on anticipated, continuing financial hits from the pandemic.

However, the stronger-than-expected recovery is not yet enough to convince city officials to restore some or all of the spending cuts in the current budget, which included a hiring freeze, no salary raises for most city employees and the deferment of several capitol projects. It is unknown whether the stronger-than-expected visitor spending in the summer and fall will continue. As a result, Finigan told city officials he would recommend waiting until at least March before they consider relaxing any spending constraints.

“I’m the conservative one, so I’ll tell you I think we need to wait just a little longer before we start making any massive moves in the current year budget. But I do think our budget is tracking along quite nicely,” he told city commissioners.

“We have to wait longer,” agreed Mayor Teri Johnston. “We have a long way to go with a great deal of uncertainty with our economic future and our health future.”

Parking revenues, which are an indicator of visitor traffic in Key West, fell 98% from 2019 levels in the early days of the pandemic: from $515,000 in April 2019 to just $7,840 in the same month in 2020. May 2020 parking revenue was down a similar 97% from the same month in 2019.

In June 2020, however, once the road closure of U.S. 1 was lifted, allowing visitors from the mainland to return to Key West, parking revenue was still down from 2019 levels but only by 19%. It dropped 26% in July but came back in August. And in September, parking revenue was up 20% over the same month in 2019, from $300,564 to $362,013; and up 6% in October.

In November, however, parking revenue had dropped 22% below 2019 but was down only 3% in December 2020 over the same month in 2019.

A similar trend can be found in sales tax revenue, another indicator of visitor spending in Key West although resident spending is included in that number, as well. While not crashing as much as parking revenue in the early months of the pandemic, sales tax numbers were back almost to 2019 levels in June, July and August 2020. And in September and October, the most recent months reported by the state, Key West brought in 22% more revenue in September 2020 as the same month in 2019, and 2% more in October 2020.

An identical trend was reported in rent revenue from tenants in city-owned buildings, many in the historic Key West Bight that typically draw most of their income from tourists. Rent paid to the city is based in part on monthly sales at the tenant business. Because of the lack of customers, those rent payments dropped by 66% and 55% in April and May 2020, as compared to the months the previous year.

But rent payments recovered over the summer, down only about 10% from the year before. And in September and October, the last two months that have been reported, rent revenue from city tenants was up 18% and 2% respectively over 2019 levels, indicating not only did visitors return to Key West, more came during those two months than during the same time period in 2019, before COVID-19.

Of course, increased tax revenue in a few areas does not mean city government finances as a whole have recovered similarly. Key West has so far spent $1.98 million in unexpected costs associated with COVID-19, including employee overtime, contributions to local food banks, medical supplies and a new tent for the city’s homeless shelter to help keep its homeless population safe from the virus. Some of that expenditure has been refunded through the federal CARES Act, which has so far allocated $1.95 million back to Key West. Approximately $1.45 million of that federal money will go into the city’s coffers while $500,000 has been designated for area non-profit organizations to fund grants for food, rent and COVID-19 testing for local workers.

Even when the impact of COVID-19 is reduced over the next year as the vaccine is slowly rolled out, Key West may never return to its previous spending levels, said City Manager Greg Veliz.

“We may decide at the end of the day that some of those [frozen staff] positions aren’t necessary. Now, we’ve been operating without them for a period of time,” he said.

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