Mexico?, By Christopher Elliott County Mid-Year Budget Update: More Cuts May Be Needed, By Zach

FEATURED COLUMNIST County Mid-Year Budget Update: More Cuts May Be Needed

By Zach Friend, Second District Supervisor

The local economic impacts of the pandemic have been significant. Many small local businesses have struggled, and while some have been able to find creative ways to stay afloat, a number have closed. As a result of these impacts, a number of local residents have become unemployed or had their hours reduced. Industries that rely on tourism and the greater hospitality industry have been hit hard and this loss of tax revenue has significant impacts on local government budgets.

The Board of Supervisors recently received a mid-year budget update to survey the current landscape and get a sense of what additional cuts may need to be made to offset the shortfall.

As you can imagine, overall tax revenue is down. In fact, County revenues have declined about 15 percent (numbers that in some cases are higher than the Great Recession). Much of these declines have been offset by significant County department reductions of up to 20 percent, including layoffs and furloughs.

Fortunately, the County had significantly built up reserves over the last few years in anticipation of a potential recession (although no one could have anticipated this steep of a drop in such a short time).

But to illustrate the magnitude of the reductions, in just the last 9 months, the County used nearly 30 percent of the available reserves.

Additionally, the recent fire devastation meant the County expended additional contingency funds set aside for emergency repairs and response. Current rains and emergency debris flow challenges will lead to additional emergency costs and it’s possible that continued rains will lead to road and other facility damage that will require additional funds.

With reserve funds already reduced by 30 percent and emergency repair contingencies expended, more cuts may be necessary to ensure there is adequate funding to meet these needs. The pandemic, and resulting shelter in place orders, have disproportionately impacted the hotel and visitor serving accommodation industry.

Hotel taxes are down approximately 41 percent from what was estimated before the pandemic and sales tax is down approximately 17 percent one the same time.

However, property taxes have remained relatively stable, due in part to pressure from people from Santa Clara County and the greater Silicon Valley area purchasing homes as new work-fromhome options.

With limited housing stock for sale this has unfortunately led to a sharp increase in already high home prices. While that means that property taxes have remained stable (even with an overall decrease in sales) it will have other impacts on affordable housing moving forward.

What’s the future outlook?

Some tax numbers have shown signs of rebounding and most are estimated to grow in the coming year (although still remain below pre-pandemic levels). For example, sales and hotel taxes are both rebounding but the County still estimates a multimillion-dollar shortfall in revenues this fiscal year.

Some of the tax rebounding will help, and the sooner we can get out of emergency response we can eliminate the emergency-related costs, but much of the County’s outlook will be determined by if there is additional federal stimulus funding — specifically, funding for state and local governments (most of which would be used to fund the significant additional frontline pandemic response costs the County has incurred). n •••

As always, I appreciate any feedback you may have on this (or any other County issue). I’m maintaining regular updates on social media at www.facebook.com/supervisorfriend and during the shelter-in-place order I’m hosting regular tele-townhalls with County and community leaders monthly on the first Tuesday from 6-7 pm. The call in information for the town halls is 454-2222 with the Meeting ID: 145384# - you are welcome to speak about any issue during the town halls or you can always call me at 454-2200.

As you can imagine, overall tax revenue is down. In fact, County revenues have declined about 15 percent (numbers that in some cases are higher than the Great Recession). Much of these declines have been offset by significant County department reductions of up to 20 percent, including layoffs and furloughs.