by County Auditor F. Milene Henley
How Are We Doing?
In my first year as Auditor, the first time I went out on a limb to project revenue, it was to say that sales tax revenue that year would not meet budget. Having no experience in forecasting, I was way out of my comfort zone in saying that. I was relieved the next week to see the local paper reporting the same thing: that sales tax revenue would fall short that year. When I read the article, however, I was chagrined to see that the paper’s source for that projection was me.
I’ve come a ways since then. I’ve developed tools for reviewing revenue, and I have a few years of good historical data to build on. Nonetheless, forecasting revenue, particularly sales tax, remains a challenge.
Sales tax is a critical revenue to San Juan County. Before the levy lift, it represented about 1/3 of the County’s general fund revenue. With the levy lift, it’s still about 26%, second only to property tax. Because sales are typically concentrated in incorporated areas, and San Juan County has only one incorporated area, sales tax revenue is more significant for San Juan County than for most counties. Even in San Juan County, about 29% of county-wide sales subject to sale tax take place in Friday Harbor.
The problem with sales tax is that it is highly variable with the economy. Sales tax grew more than 10% from 2005 to 2006. The following year, it grew only .3%. Since then, it has increased twice and decreased twice. This year, based on results through June, it looks like sales tax will fall again.
The good news is that revenue is up in other areas. Planning and permitting revenue, in particular, is up by about the same dollar amount sales tax revenue is down. With that, it looks like there will be no need for a mid-year budget correction this year, the first time in four years.
Expenditures are also on track to finish 2012 within budget. The departure of administrative staff resulted in some unexpected costs related to leave payout, but those expenditures should be largely manageable within budgeted contingency funds.
Despite favorable results this year, we’re still not out of the woods. Status quo expenditures continue to grow faster than status quo revenues, and Council continues to look for structural and operational ways to contain costs. Unfortunately, in an environment in which one of our major revenue sources has fallen significantly in recent years, it is unlikely that we can maintain our current levels of service without some increases in revenue, as well.
So, I invite you, as concerned citizens, to do your part. Invite your relatives to visit. Invite your business associates. Tell them to stay in hotels, eat in restaurants, and buy stuff to take home for the kids. Better yet, tell them to buy a house, or at least a boat.
With your help, maybe someday soon I will soon be able to accurately project an increase in County sales tax revenue.
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Sadly, I’d not recommend buying a house here to anyone, especially on the shoreline. It will soon be impossible to build or remodel without huge hassle and expense, with the Planning Department telling you how big your house will be, where on the lot it belongs and what you can do on the land–just for starters.
Thank you, Milene, that was clear, honest and straightforward. We are indeed in tough times–every business we deal with is struggling right now. Every family we know is stretching to make things work. It would be nice to see our leadership acknowledge the struggles of the SJC 99%
Nick Jones
Hi Milene, Good letter and thank you. I’m wondering how much of permit revenue is tied to fears of getting in “under” the CAO. If the CAO passes in October as planned then presumably we will go into 2013 with reduced sales tax and a minimal amount of “permit” revenue as well?
San Juan County, probably more than any other county in the state, has to rely on vendors based outside the county for both services and materials. Do we know if all of the sales tax collected for those materials and services that belongs in San Juan County is actually forwarded by the state to our treasurer?
As I understand it, we rely on the state to send it all…, but even if they do, they – the Washington State Dept of Revenue – has no way to be sure that what is reported by providers is accurate. They only assume that business know the rules and abide by them.
So what are the rules? Sales Tax is charged and paid in the County where the goods and services are delivered. So says one of our Councilmen. Or is it where the services are performed and the materials installed? So says one of Orcas’ leading real estate persons. There are others. Maybe just one thing would help. Quit issuing building permits without an affidavit of all sales tax collected & paid in San Juan…
Its very sad to see the increasing dollars incoming for regulatory services vs goods and services to and from our neighboring citizens for providing real goods and services on the ground. The situation is entirely upside down.
And as Peg relayed, this is only the beginning of a trend towards the “Regulation & Enforcement” Based Economy.
Given the way the Washington State Department of Revenue and the Governor has jerked the reporting of Sales Tax Revenue around the past three years, one has to have great admiration and sympathy for our County Auditor when attempting to accurately report trends.
On August 1st,any number available for the second quarter revenue cannot possibly include the last seven days of June because of the reporting cut off dates and late filings and if the report tries to correct this by including the last seven days of March …… well there is a big difference between March and June in our tourist based economy.
I think I would like to see some more numbers like ferry ridership,the “bed tax” total for the second quarter and a look at late and no-pay records for the period before I will concede the second quarter 2012 sales tax revenue is down.