Hermiston herald. (Hermiston, Or.) 1994-current, April 15, 2020, Image 8

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Hermiston herald., April 15, 2020, Page 8, Image 8

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Newspaper Page TextBUSINESS A8 • HERMISTONHERALD.COM WEDNESDAY, APRIL 15, 2020 Cities, counties face unknowns when budgeting during COVID-19 By JADE MCDOWELL and ALEX CASTLE STAFF WRITERS As households and busi- nesses adjust their budgets in reaction to COVID-19 shutdowns, cities and coun- ties are also trying to nav- igate uncharted waters as they budget for the 2020-21 ﬁ scal year. The pandemic has affected just about every part of daily life, and with it, revenue local governments take in from sources rang- ing from gas taxes to facil- ity rentals. Hermiston’s assistant city manager Mark Morgan and ﬁ nance director Mark Krawczyk feel Hermiston is in a better position than some communities when it comes to navigating the eco- nomic impacts of COVID- 19. Since the Great Reces- sion, a larger percentage of the city’s jobs have migrated toward essential industries, such as food processing. “I would consider Herm- iston in a better position now to weather a recession than in 2008,” said Morgan, adding that’s “not to imply we’re not concerned.” The city has a lower than average percentage of peo- ple employed in hospitality and leisure industries. Mor- gan cited Census Bureau data showing the 16 indus- try sectors most closely tied to tourism, including restau- rants and hotels, made up 7.8% of Hermiston jobs in 2017, compared with 11.6% countywide and 11.5% statewide. He said Hermis- ton hotels have likely seen some effects, but probably not as much as a resort town like Bend. HH ﬁ le photo People watch Cuarto Concepto perform on May 4, 2019, at Hermiston’s Cinco de Mayo celebration at the Eastern Oregon Trade and Event Center. The Eastern Oregon Trade and Event Center may be particularly hard hit by an economic downturn. “The people who come to stay in a hotel in Hermiston, it’s because they’re working — they’re construction con- tractors, things like that,” he said. That bodes well for the city’s ability to continue gathering transient room taxes and tourism promotion assessments on hotel room stays. Hermiston doesn’t have a local gas tax, so it won’t see a drop there as people drive less, but there could be some impact on gas tax revenue coming from the state. Morgan said it’s too soon to know, and to pre- dict the impact on revenue from funds like the state’s liquor tax. Most of the city’s franchise fees come from electric companies, but it’s also unclear how stay home orders will affect electricity usage. And right now fed- eral stimulus money is “fall- ing from the sky,” Morgan said, so the city could catch some windfalls. Krawcyzk said the city is losing revenue from recre- ation program sign-ups, and rental revenue for the East- ern Oregon Trade and Event Center, Hermiston Commu- nity Center, parks and meet- ing spaces. The city has been working to get the relatively new EOTEC proﬁ table, and the ban on gatherings has put a damper on momentum they had been gaining. “We had virtually no rev- enue there in March, and will have none in April and May,” he said. However, the city does beneﬁ t from the fact that it isn’t depending on the rev- enue to pay off debt service for its facilities. In many cases, Krawcyzk said, reductions in revenue have been somewhat offset by reductions in cost. The city subsidizes the Hermis- ton Aquatic Center through its general fund, for exam- ple, so if the pool didn’t open this year they would lose admissions revenue but also not be paying lifeguards. While the stock market has taken a hit in the past month, Krawczyk said the city invests so conservatively and interest on reserves are such a small part of the bud- get that it’s not a major issue. He said department heads are working on budgets now, and after he and City Man- ager Byron Smith review them, they can decide if they need to make cuts. Umatilla County prepares for reduced revenue According to Uma- tilla County Commissioner George Murdock, who serves as the commission- ers’ budget liaison, the rev- enues for the 2019-20 bud- get are already in place and the county has maintained its basic spending so far. However, the com- missioners have preemp- tively directed department heads to make contingency plans, eliminate nonessen- tial spending, limit travel and freeze all hiring except in emergency situations approved by the board. “If there is a fear, it is that while we are ﬁ nancially able to somewhat continue business as usual this spring, that’s only because the rev- enues are in hand to sustain basic spending,” Murdock wrote in an email to county staff earlier this week. “We have no such guarantees going forward and therefore we should be doing our due diligence in preparing for funding declines.” Based on Murdock’s message to the staff, those funding declines could come from a variety of sources, including antici- pated delays and reductions in both property and income tax collections. County pro- grams, such as community corrections and drug and alcohol treatment services, have already seen a decrease in clients. These and other programs that either rely on or are supplemented by state grant programs are contin- gent on client numbers, so their revenue is likely to decline with them. Other fees the county usually receives for home construction, travel and other services are also expected to decline, Mur- dock said. And, usual rev- enues from school districts and other sources remain uncertain. The potential budget shortfalls could require the county to pause its planned additions to the sheriff’s ofﬁ ce, which has empha- sized increasing its patrol deputy force over the past few years. It may also limit further growth of the plan- ning department, which was expanding to reﬂ ect the county’s greater demand for economic development and help with post-ﬂ ood recovery. Additional growth of those departments has been budgeted, Murdock said, but is dependent on them con- tinuing to bring in the reve- nues they were projected to before the pandemic. Some of the county’s capital projects that have already been budgeted and contracted are expected to be completed as planned, including rerooﬁ ng the pub- lic safety center for more than $500,000 and the $1.6 million jail renovation, which is funded by the state. “We’re reluctant to do things with projects that might impact business activity in the community any more than it already is,” Murdock said. Murdock wrote to staff that the pandemic is pro- jected to spike in Oregon by May 6, though he expects at least four to six weeks to pass after that before things will begin to improve and recover after that. “So, what we can pretty accurately predict is that we will be at least halfway through the 2020-21 bud- get cycle before the turn- around is genuinely real and that the impact of COVID- 19 will be with us through much of the 2020-21 budget cycle,” Murdock wrote. 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