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County erred in EDC funding

Island County last month took $164,300 out of its general fund to make up for money erroneously given from another fund to the Economic Development Council.

The move was made after the Washington State Auditor’s Office told the county it couldn’t use money from the rural county sales tax to help support the non-profit Island County Economic Development Council (EDC).

The county reacted to the auditor’s finding by using general fund money to repay the rural county sales tax fund.

Mike Shelton, chairman of the Board of Island County Commissioners, said the reimbursement total of $164,300 came from the years 2003, 2004 and 2005. That’s the amount given to the EDC over those years.

The EDC’s mission is to attract more business and industry to the county. It received money in 2003 from the then-new rural county sale tax, after the Legislature gave the “rural county” designation to Island County. Such counties can keep .08 percent of the existing sales tax to use for economic development purposes.

However, the state audit found the EDC did not use the county money as intended by RCW 82.14.370 in the state code. “The organization did not use the rural county sales tax revenue to finance public facilities serving economic development purposes,” states a letter from the Auditor’s Office. “Public facilities are bridges, roads, and various types of utility facilities or infrastructure facilities.”

“They said it was outside of the scope of rural sales tax money,” Shelton said Wednesday of the auditor’s finding. Originally, the county commissioners thought the money could be used for a wider range of economic development activities. “It seemed appropriate to us,” Shelton said. Earlier in the week at the commissioners’ regular meeting, he pointed out that the legislature in 2004 tightened how rural tax money could be spent for economic development.

Funding the EDC through general fund current expenses has a drawback, in that other agencies, such as health services and the sheriff’s office, are competing for the same money. Money used for the EDC, for example, might instead be used to help fund a new deputy sheriff’s position.

“Absolutely,” Shelton said when asked if that could happen. “It all comes out of the same pot.”

Shelton said he still supports giving some county money to help the EDC pursue its mission, but in the future the money will have to come out of current expenses. He’s not sure how much the county will provide in 2006. “It might not be up to the same level,” he said.

Commissioner Mac McDowell sees the situation similarly. “We’re not going to stop funding it at some level,” he said of the EDC. “But current expense is always pressed to the limit - EDC is another entity that wants money.”

Sharon Hart, executive director of the EDC, said the organization received $56,900 this year from the county, all from the rural tax account. Its annual operating budget is $87,000, so the county’s contribution is significant.

Most of the county’s money is used for regular operating expenses, but Hart said some goes to an “outreach fund,” to pay for such things as direct mailings to businesses, trade magazine listings, and brochures and magazine ads touting the county as a good place to do business. She also used the money to attend one trade show in Denver this year.

“We’re pretty dependent on the county for supporting the EDC,” she said.

Hart added that supporting the EDC is nothing new for Island County. Even before the rural county tax money started flowing in, the county annually paid around $32,500 to help the EDC operate. That increased with the rural tax revenue, and the entire amount was shifted to the rural tax fund.

The EDC operates with two full-time employees, Hart and administrative assistant Sharleen Eller, and two interns. “Without the county we would have on employee here,” Hart said.

Hart said she will bring the issue of county funding to the EDC board before making her 2006 request to the commissioners in October. And she’s aware the competition will be stiff for general fund dollars. “There’s a lot of compelling needs out there for funding. I don’t envy the commissioners at all,” she said.

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