Island County government is predicted to lose millions of dollars in sales taxes and other revenues this year because of the pandemic, but healthy reserve funds and nearly $4.7 million from a state coronavirus-related program will ease any impacts.
County Budget Director Doug Martin gave commissioners a presentation on revenue impacts from the pandemic last Wednesday. This week he plans on discussing the fund balance and later he will talk to them about expenses.
“It’s a work in progress,” he said in an interview Monday. “Every day that goes by, it’s evolving.”
In some ways, the impact on different funds illustrates how the pandemic has affected different sectors of the economy. Sales tax is the second largest source of revenue for the 2020 budget, with property taxes accounting for the most at $18.4 million.
Overall, Martin predicted that the county will lose about $2.8 million in sales tax, or about 20 percent of what was budgeted this year.
He said his forecast model shows that sales tax from construction will be down 70 percent in March and April, accommodations and food service will be down 75 percent and other categories of retail will show a decrease by 50 percent in those months.
Sales tax collections in May and June, he predicted, will be at 43 percent of the budgeted amount, July will be 60 percent and August will be 75 percent.
The rest of the year will return to sales tax collections at 90 to 92 percent of what was budgeted.
The biggest loser in his predictions is the hotel and motel industry. Martin predicted that collection of hotel and motel tax collections for the year will be just 25 percent of the budgeted amount.
The commissioners discussed the impact the cancellation of events would have on retail business and hotels. Commissioner Helen Price Johnson pointed out that there was a 76 percent decrease in people traveling around in the areas.
In a wrinkle, the state recently gave businesses permission to delay paying sales tax by 30 days.
“If you try to analyze sales tax data,” Martin said, “it totally throws that in the trash.”
Beyond sales taxes, Martin predicted that the public works department will lose about 18 percent, or $400,000, of the gas taxes expected for the year; about 5 percent, or $430,000 lower than budgeted, in dump fees; and about 18 percent, or $900,000 in state CAPRON funds, which is a state refund of vehicle license fee and gas taxes for counties composed of islands.
Real restate excise taxes will be decreased by a predicted 10 percent, or $340,000, and the planning department might see a 15 percent decrease in permit and plan checking fees.
“We’re going to have the ability to absorb some of this. We have some resilience,” Martin said in reference to the general decrease in revenues.
The county has a minimum fund balance, or reserve funds, of 10 percent. In addition, the county maintains two months in operating expenses. The 2020 budget for all county funds and departments is $110 million.
The federal government awarded CARES Act funding to states and cities with populations of 500,000 or more. Gov. Jay Inslee announced that it would award $300 million of the state’s CARES funding to local governments that did not receive direct payments, according to the state Department of Commerce.
The money could be used only for expenditures incurred in direct response to the pandemic, such as medical and public health needs. The county was awarded $4.7 million but it won’t come as a check; the county will have to submit expense reports to the state to receive reimbursements.
Martin said the commissioners and the economic recovery team haven’t figured out yet whether the money can or should be used for grants to help the community.