PORT TOWNSEND — The fact that the city of Port Townsend will receive $200,000 less than projected in sales tax revenue will have a ripple effect on the city’s budget that may take years to correct, the city manager said this week.
“We will need to be very careful about what we can do in terms of services,” City Manager David Timmons told the City Council on Monday.
“We can tell the citizens that we can live within our means, but we may not be able to fix your road.”
Measures under discussion include a moratorium on police overtime, a renegotiation of contracts and the postponement of capital projects.
It also has derailed a schedule of proposed town meetings, which will probably not resume until December, Mayor David King said.
The city had projected receiving $1.7 million in sales tax revenue, but two vendors had misreported the destination for the funds, so that number must be readjusted to $1.5 million, City Finance Director Michael Legarsky said.
The city’s loss is Jefferson County’s gain.
The county will receive the $200,000 rather than Port Townsend.
The misreporting by the two vendors goes back as far as 2003.
The amount of misallocated funds cannot be calculated, and the city will not have to return any of those funds, said state Department of Revenue spokesman Mike Gorylow.
Timmons addressed the council for about an hour Monday.
No action was taken. Timmons is scheduled to update the council at a workshop Monday that will begin at 6:30 p.m.
The meeting will take place in council chambers at City Hall, 540 Water St.
“There are so many balls in the air and nothing has landed yet,” Timmons said.
The city discovered the error last week when it noticed that its projected sales tax revenues were down for the second month in a row and called the Department of Revenue for an explanation.
Timmons said that the downturn in the August reports was assumed to be a result of decreased sales caused by the downtown construction projects in the spring.
The revenue department informed the city that vendors had misreported the delivery location for fuel that went to the Port Townsend Paper Company, which is outside the city limits even though it has a Port Townsend address.
“They had to have known about this [change] in May,” Timmons said.
“I can’t believe that no one picked up the phone and told us about it.”
Gorylow said last week the agency generally notifies a municipality if tax figures change drastically but apparently failed to do so in this instance.
At the council meeting, city Finance Director Michael Legarsky said that his department received a call of apology from the department last week.
“Normally they have a process to see these changes and report them,” Legarsky said.
“For some reason, they didn’t in this case.”
Legarsky characterized the Department of Revenue as “difficult to talk to” about specifics.
Most of the department’s information is proprietary, including who is paying the tax in what district — which makes it difficult for the city to catch these kinds of mistakes, Timmons said.
Such errors are not unprecendented.
Timmons said that about 10 years ago, a vendor delivering to Fort Worden State Park allocated its sales tax revenue to the county, an error that the city caught.
Timmons said he did not know if any other vendors have misallocated deliveries to the mill, but said that many people think the facility is within the city limit.
“Maybe we should paint a big yellow line at the city limits because no one seems to know where it is,” Timmons said.
The situation could increase the desire of the city to renegotiate the amount of Proposition 1 funds that it allocates to the county for support of recreation, something that was under discussion before the shortfall was reported.
The news came on the heels of a State Auditor’s report that stressed the need for the city to continue stringent financial controls.
At the time, Timmons told the Peninsula Daily News that the city was on the road to stability, “but we never know whether something unexpected will come out of left field.”
At Monday’s meeting, Timmons referred to the published quote and said, “I will never say anything like that again.”
Jefferson County Reporter Charlie Bermant can be reached at 360-385-2335 or at charlie.bermant@peninsuladailynews.com.