County opts to dip into reserves

"Island County’s government will hold the line on spending next year, despite Initiative 695, the county commissioners decided Tuesday. Spending might even edge up a bit.But that’s only because the commissioners agreed, 2-1, to draw cash out of the county’s $1.2 million reserve fund to make ends meet.The hit on the reserve fund could reach around $325,000 by the time the year 2000 is done, Commissioner Mike Shelton said.And the year after that, all three agreed, could be much worse.“If we do not get significant help from the Legislature, we will have to cut $1 million out of a $16 million budget next year,’’ Shelton said. “... and when 80 percent of your budget is in wages and benefits, the bottom line is some positions are going to have to be cut. Or some work weeks shortened. Or something like that.’’Initiative 695, a measure passed by the voters on Nov. 2, eliminated the state’s sky-high Motor Vehicle Excise Tax and replaced it with a flat $30-per-vehicle fee.The vote will bring big savings to many of the state’s car and truck owners, particularly if they own newer or more expensive vehicles.On the other hand, the tax financed numerous state and and local programs, including police, transit and sales tax equalization — which funnels money into cities and counties that have lower-than-average retail sales.Because money from the Motor Vehicle Excise Tax no longer exists, the state Office of Financial Management projects that Island County will lose around $295,000 in sales tax equalization in 2000 and $589,000 in 2001. It’s projected to lose about $252,000 in money for law and justice programs in each year, and $14,000 a year in income from taxes on travel trailers.The end result: The county will not get $561,000 in income in 2000, and $855,000 in 2001. In addition, the commissioners agreed to increase total spending next year by about $139,000, which means they need to find around $700,000 to make ends meet.A bit of that, or about $74,000, will be made up by raising the county’s property tax request in 2000 by 1.42 percent — the estimated rate of inflation. A healthy portion of the rest will be made up with property tax revenue from new construction, which adds about 3 percent to the county’s property tax income every year, Commissioner Mac McDowell said. New, more realistic, estimates of sales tax income account for a bit more. The rest — about $325,000 — will have to come out of the county’s “rainy day’’ reserves, according to County Budget Director Margaret Rosenkranz’s projections.At a budget workshop Tuesday, Shelton and Commissioner Bill Thorn agreed to take cash out of the reserves to make ends meet. McDowell objected, saying it would draw the fund too low.“We are doing something that runs across the grain in dipping into the reserve fund,’’ Thorn told a roomful of county department heads Wednesday morning. “But it’s a rainy day fund, so, OK, the showers have begun.’’“The real pain begins next year,’’ he said. “It’s going to be rough.’’By law, the commissioners could have tried to declare a budget emergency in order to up the county’s property tax draw by the maximum 6 percent next year — a move that would have brought in another $233,000 or so — but all three declined to do that.They also said they won’t let county departments raise fees to make up the difference.“We’re not going to punish the electorate for its vote,’’ Shelton told the department heads Wednesday. “That’s not what we’re about.’’TAKE MEDICINE NOW?In the Tuesday workshop, McDowell said he thinks the county should start making cuts now, without using reserves to cover the losses.“Just to put it off for one more year is not right, because it becomes so much more hurtful in the second year,’’ McDowell said.Shelton and Thorn said they’re worried that covering next year’s losses with built-up reserves will cause voters to conclude that I-695 backers’ claims during the campaign were true — that government won’t really have to make tough cuts to make up for the tax loss. But the legal status of much of the initiative is still open to court challenges and interpretations, and both agreed it would be better to cover the shortage with reserves now, and wait before permanent cuts get made.All three agreed, though, that the reserve option won’t be there next year.“We’ve bought ourselves a year’s worth of time,’’ Shelton told the department heads. “That’s all.’’"

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