BUSINESS
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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