PORT ANGELES — Clallam County is facing a $2.6 million to $3.6 million revenue shortfall because of COVID-19, Chief Financial Officer Mark Lane told commissioners this week.
Lane cautioned in a mid-year budget review that his projections were “still very much subject to change.”
Commissioners held a public hearing on the mid-year budget Tuesday as required by county charter.
No public testimony was given at the virtual meeting and the board took no action.
“This is not the bad year,” Commissioner Randy Johnson said during the meeting.
“Next year is the one that’s going to be really difficult.”
“And if we’re lucky, it will only be next year that’s really difficult,” Commissioner Mark Ozias added.
Clallam County budgeted a $3.1 million general-fund deficit in 2020.
“I know we were thinking, once you adjust for underspend and personnel costs, we thought that net deficit was going to be closer to $1.7 million,” Lane told commissioners Tuesday.
A $2.6 million to $3.6 million revenue shortfall would result in operating deficits exceeding the 2020 budget by $200,000 to $600,000, Lane said.
The general fund balance would end the year somewhere between $11.5 million and $12 million, Lane said.
Lane said June sales tax revenue, which reflect April spending, were “somewhat encouraging.”
“I believe our Q3 (third-quarter) sales taxes will likely provide a more accurate reading for us in better understanding what the near and longer-term likely impacts will be that can then lead to further refinement of our projections for the year and heading into 2021,” Lane said in a five-page executive summary to the mid-year budget.
Clallam is one of the few counties in the state with no debt.
Lane detailed his mid-year projections in a 34-minute presentation to the board.
“I don’t mean to sound like a broken record, but it warrants repeating that this projection is still very much subject to change as we gain better visibility of COVID’s impact on our tax and our other revenues,” Lane said.
The mid-year budget contained four scenarios based on 9.2-, 10.8-, 13.6- and 3.2-percent declines in sales tax revenue.
Lane said his “best-guess” scenario was a 9.2-percent decrease in sales tax revenue for the year.
“That’s presuming we’re going to have some painful months ahead, especially, I believe, Q3 in particular is going to be tough,” Lane said.
“Based on the scenario that I’ve just outlined, I am projecting our general fund operating deficit to be about $3.3 million negative, which is about $203,000 worse than our original budgeted deficit.
“All told, with everything that we’ve got going on, I’m actually somewhat relived that that’s the amount we’re looking at.”
Clallam County had a 15.6-percent decline in sales tax revenue in May and 9.7 percent decline in June, Lane said.
A two-month lag in sales tax revenue means the May and June revenues were collected in March and April, respectively.
“One of the recurring themes that you see in various guidance — and we’re talking about the Walmarts of the world, the Home Depots — a lot of them attribute some of the better-than-expected results in June, and again collected in April revenues, largely on the stimulus checks that were starting to come in in full gear,” Lane told commissioners.
“Depending on what people’s individual choices were in how they spent those monies, I’m expecting that that impact will be relatively short-lived.
“We’ll have to see,” Lane added.
“I hate to continue to have to use that phase ‘We’ll have to see,’ but I really think as we get our July results here in a couple of weeks, we’ll have a better sense of whether we’re going to see a more return to really the double-digit retail sales (tax) declines that I’ve projected for the balance of the year.”
Clallam County is distributing $4.18 million in federal Coronavirus Aid, Relief and Economic Security (CARES) Act funding for needs related to COVID-19.
Clallam County will be reimbursed by the state Department of Commerce for CARES Act spending around public health, business support, rental and utility assistance, support for the homeless population, child care and food security.
Lane said CARES Act spending will be made a separate line item in the county budget.
“We’re trying to do this to maintain an apples-to-apples comparison to last year,” Lane said.
“This is already a difficult enough exercise without there being that additional noise in the numbers.”
Reporter Rob Ollikainen can be reached at [email protected].