North Bend, Snoqualmie anticipate significant revenue shortfalls due to COVID-19 crisis

On Monday, April 20th the City of Issaquah announced that due to significant dips forecasted in sales tax, business & occupation tax and utility taxes, it was estimating nearly $10 million in reduced revenues for the 2020 general fund.

In response, Issaquah Mayor Mary Lou Pauly introduced a budget plan to reduce city expenditures, including staffing cuts; temporary furloughs for all non-union employees; salary and benefit reductions; reducing city programs and services; closing Tibbets Creek Manor and more [See full list of proposed cuts here.]

We reached out to the Cities of North Bend and Snoqualmie to see if similar cuts might be necessary to deal with any COVID-related budget shortfalls.

North Bend Mayor Rob McFarland said, “We, like all local jurisdictions anticipate significant revenue shortfalls due the reduction of business activity in response to the COVID-19 pandemic.”

McFarland explained sales taxes, business and occupation taxes, and property taxes are the city’s main sources of revenue for North Bend.

He added, “Our city finances, unlike many surrounding cities, have a larger share of sales tax revenues compared to other revenue sources and therefore an outsized impact when stores are closed.”

McFarland said before the statewide Stay Home Order was mandated the city was experiencing solid sale tax revenue growth and this, combined with the city operating with very lean staffing (which has been challenging), gives it a little more cushion to more fully evaluate things before taking any additional savings actions.

He commented, “We are continuing to evaluate and develop plans for adjustments in the city budget which may include staffing adjustments and those proposals will be vetted with Council in the near future.”

Snoqualmie Mayor Matt Larson said they are not anticipating staff reductions at this time. He added revenue decline estimates are speculative at this time and hoped to more detailed data after the end of April.

Larson thinks Snoqualmie may end up in better shape than Issaquah because the city’s two major revenue sources – property and utility taxes -which are very stable.

He said, “Unlike volatile sales taxes that rise and crash with economic cycles, these sources are very stable. Cities like Issaquah and North Bend rely on a significant amount of sales and B&O tax revenue to sustain their budgets. It’s great during the good times, but painful during recessions and a virus crisis. While we will still be seriously impacted, it will not be nearly as significant as communities like Issaquah, North Bend, Covington and Kent. “

Larson also noted city planning for its “fiscal cliff” – which refers of the build-out of Snoqualmie Ridge when huge amounts of one-time development related revenue would disappear – may also help with COVID-19 budget shortfalls.

Larson said, “To prepare for this, we slowly removed one-time revenue from our ongoing operational budget to create an ongoing sustainable general fund. This action gave us the ability to build up healthy operational, emergency, capital and rainy-day reserves.”

Larson did say, though, several capital projects like the Community Center expansion may become a victim of the current crisis more than staff cuts.

He anticipates city reserve funds helping with budget challenges caused by the COVID-19 crisis. Snoqualmie City Council, though, would have to approve that spending.

North Bend (left) and Snoqualmie (right) City Halls

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