It appears likely that Island County officials will ask residents to vote on whether to raise their own taxes this fall to fill a projected shortfall of $1.2 million next year.

At the same time, the county commissioners will probably craft a budget with deep cuts, which can be enacted in case tax increases don’t come through. Or the commissioners could shift money from the county roads levy to the current expense fund, an option they refused to consider last year.

The commissioners kick-started the budget process with a gloomy roundtable session Monday, followed by a discussion with the Budget Director Elaine Marlow Wednesday. Marlow’s five-year fiscal projections are dismal, with a $623,000 current expense fund shortfall this year, followed by a $1- to $1.2-million hole in 2011. If the county filled the gaps with unreserve fund balance dollars, they would all be spent in three years.

The commissioners made it clear that they are strongly considering asking the voters to raise either property or sales tax. Commissioner John Dean spoke most strongly in favor of increasing taxes, though he admitted that such a ballot issue wouldn’t be good for him personally in an election year.

“My opinion was that everyone has already given all the blood they can,” he said, referring to cuts in county departments.

Commissioner Angie Homola said it’s vital to educate the public about the budget problems and what services the county provides, then to let them vote on what they’re willing to fund.

The elected officials and department heads at the roundtable offered the commissioners some pointed advice: prioritize, make decisions early and consider ways to raise revenues.

County Prosecutor Greg Banks urged the commissioners to make funding decisions based on priorities and not to “even out the pain” among departments.

Auditor Sheilah Crider, a Republican known as a fiscal conservative, advised the commissioners to turn their attention to increasing revenues since budget cuts have already been made.

“We need to find a way, in some manner, to begin increasing revenues,” she said.

Over the last two years, the commissioners cut $4.2 million in costs, plus they dipped into reserves. Marlow had previously pegged the cuts at $5.2 million, which takes into account the normal cost increases that didn’t occur because of cuts. She said the $4.2 million number was easier for people to understand. More than 50 full-time equivalent positions have been cut.

The shortfalls are due to a number of factors largely related to the economic downturn. The county’s revenues from investment interest, sales tax and planning fees nose-dived. Homola has maintained that the county’s historic reliance upon taxes from new construction was ill-advised and has come to a screeching halt. At the same time, certain costs, especially health insurance, have skyrocketed.

Marlow pointed out that counties are limited in their ability to raise revenues. The city of Oak Harbor, for example, has an ample utility tax, but she said that option isn’t available to the county. Also, Initiative 747 limits property tax increases to 1 percent a year. Marlow projected expenses to increase by more than 3 percent a year for the next five years, even without additional employees or cost-of-living increases.

Yet I-747 has a built-in mechanism that allows the voters to decide if they want to increase property taxes beyond 1 percent. Marlow explained that the commissioners could ask voters to pass a property tax levy lid lift this fall. Island County currently has the lowest levy rate in the state. An increase that amounts to $26 extra a year in property taxes for the owner of a $300,000 home would raise an extra $1.2 million a year, which is the size of the projected 2011 budget deficit.

Or voters could be asked to support a criminal justice sales tax. The maximum three-tenths of 1 percent would raise an estimated $2.4 million a year, but 40 percent would go to the cities.

Commissioners Homola and Helen Price Johnson expressed concerns with a sales tax increase. Homola pointed out that they’re not as reliable as property taxes.

“What I struggle with is the regressive nature of sales tax,” Price Johnson said.

Lastly, Marlow told the commissioners that they might want to consider shifting levy capacity from roads to current expense. It would translate to more money for the current expense fund and less for maintaining and improving county roads. According to Marlow, 13 other counties already do that. The commissioners wouldn’t have to ask the voters, but could make the decision themselves.

The commissioners haven’t made any decisions about how to deal with this year’s projected $623,000 shortfall. It’s a result of revenues from sales tax and investment interest running behind expectations, plus the county was hit with an unexpected cost of $173,000 from I-COM, the 911 dispatch service.