$600,000 hit: County leaders hope October sales tax loss won't become a pattern
By Steve Herring
Published in News on February 1, 2009 2:00 AM
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News-Argus/GREG SOUSA
Mary Ellis, left, a sales consultant at the Belk department store in Goldsboro, assists Jean Barwick Saturday with a cosmetic purchase.
Wayne County's sales tax revenues took a $600,000 clobbering in October -- a hit that will have repercussions across the entire county budget from schools' capital needs to the general fund.
It will be the first of the week before the county knows how much of that loss can be blamed on the weak economy and how much is the result of the state's Medicaid relief program that showed up for the first time in October.
The county received about $1.3 million in sales tax revenues for October, down from $1.9 million in October 2007.
The sales tax, audit, general health of the budget and looming budget process will be at the forefront of discussions Tuesday when commissioners hold the first of several retreat sessions. The meeting will follow the board's regular first-of-the-month session.
"By us getting the Medicaid phase out they (the state) took money from the other side and we just got the hit and it could not have come at a worse time," County Manager Lee Smith said.
Smith said he was "alarmed" by the figures and is curious to see the November and December totals.
Since the county operates on a 90-day delay on sales tax revenues, it will be March and April before the county will have those figures.
"I have heard some retailers say November and December were not as bad as they thought they would be," Smith said. "In some cases it was better, but still bad."
Another loss like October's could be a serious issue, he said.
"If I annualize that ($600,000) out it could hit for anywhere between $2 million to $3 million by year's end," Smith said. That is devastating."
Financial advisers have told the county to be prepared for a downward trend in sales taxes over the next two years.
That and other economic factors, he said, are why the county started money-saving actions months ago, including a switch to a four-day workweek for most county offices.
"I know (saving) $200,000 in utilities doesn't sound like a lot, but every $200,000 I can get to hit that $2 million is going to help," he said. "I am looking for every $5,000, $10,000, $15,0000 that I can find and still meet service demands out there.
"So far this year as far as budget, we are on target. A lot of counties are not."
And that has happened, in part, he said, because the county has not overestimated its revenue take for the year.
"I never ever estimate the full amount of a revenue. I have been around before, something can happen. I think we are better off being conservative in estimates. We built a fund balance by underestimating revenues and living within those resources."
The housing market here is not suffering as badly as it is in other areas, Smith said.
Values went up, but not as dramatically. Also, the values generated by the county's last property re-evaluation in 2003 are more "realistic," he said.
But while the county might experience some growth, Smith plans to budget flat over the next few years.
Normally, the county looks at historical data when the budget is compiled.
However, in today's economy that data "doesn't matter," Smith said.
"In the past I could count on sales tax moving up at a faster rate than property taxes," he said. "Now that has shifted back and the one you can count on is property, but that is not the one you want to plan on because that is the one that hits people the hardest.
"We fly blind until we get budgets from the state and federal governments. The federal we do not know until October, yet we have to have a budget by July 1 so we make an estimate and many times you are wrong."
For example, in August 2005 the state budget changed and the county found that the schools had to have an additional $350,000.
"We had to amend (the budget) and give it to them," Smith said. "That is almost a penny on the tax rate. We had it built into budget just in case, but we had not said we would give to them."
It will be important to watch legislators this year to ensure they follow through on legislation set to become effective in 2010 that requires people to pay their vehicle tax when they renew their vehicle registration.
People, he said, have found loopholes in the current system that are costing the county lost tax revenues. The collection rate is in the low- to mid-80 percent range.
The change would make the collection more efficient, he said
"I have an ultimatum from the board this year -- there will not be a property tax increase. That is going to mean a number of things. If revenues fall it means we are going to have to cut."
The county has been doing just that over the past several years including a $3 million cut in the current budget.
One way the county has done that is to reduce the number of county employees by 131 people. No one has lost their job, but as jobs were vacated, they were eliminated.
"That is tough on our folks," he said. "We do need more staff. I need more staff in health and DSS and tax office and the sheriff is desperate for deputies, but we lack money to hire them. Therefore, I have to find savings just to keep the people that I have."
Smith said he knows other businesses are stressed as well.
"Health and DSS are different kinds of businesses," he said. "They are sitting there trying to help people. People who are being laid off are coming to us for help."
Other money-saving measures include a no-idling policy for all county vehicles, and more recently close to 30 vehicles were parked instead of being driven back and forth from home by employees. Employees have been told to turn off lights and computers when not in use.
The county also purchased laptops for county inspectors to enable them to file information without having to travel back and from forth from the office to the field.
Smith has frozen capital projects as well as hiring of new employees with the exception of shift and emergency workers.
"The county needs to live within its means," Smith said. "The problem is the county has people coming in off the streets that are demanding service, be it inspections or tax office or deputies or health and DSS, and that is not all state and federal money. The big problem is that the state and federal governments used to pick up lot of that but the percentage is shifting to counties so I am going to wind that same story again -- unfunded mandates are killing us.
"The problem is the state is broke, too. I don't see a lot of help coming from anybody. I hate to be the voice of doom and gloom on the stimulus package from the state and federal governments, but if we get any we will be lucky. I am not counting on it. What I am counting on is that we are on our own."