A decrease of about $125,000 in city revenues from bed and meal taxes over the summer is likely due to a reduction of visitors due to wildfire smoke in that period, City Council members agreed at their Dec. 3 study session.
The transient occupancy tax (TOT) was down about 5 percent for the quarter, which translates to a decrease of around $45,000 in the general fund. This won’t impact this budget cycle because the cost can be absorbed, Mark Welch, financial director, said. That’s despite an increase in the tax rate to 10 from 9 percent that took effect. Aug. 1.
Welch presented the numbers during a review of the fifth quarter of the current biennial budget, which started July 1, 2017, and concludes June 30, 2019. The fifth quarter started July 1 and ended Sept. 30.
Food and beverage tax revenues were down about 5 percent in the quarter, which translates to about $80,000.
“An $80,000 reduction is a $1.6 million impact (in total sales), so $1.6 million less is spent in the community at these restaurants in that first quarter (of the 2018-19 fiscal year),” Welch said.
These funds go to fund designated projects in the city, including parks and street repairs.
“So, if this revenue source comes in low it impacts projects and future projects, not necessarily current projects,” Welch said.
Welch said the numbers show about a 10 percent decrease, not 5 percent, but said that’s due to about 35 restaurant owners who have currently not paid. He’s confident that the city will receive that money, so he’s reconstructed the math to account for the temporary loss.
Mayor John Stromberg pointed out that this could be an indication that these restaurants are struggling financially.
Welch said that these decreases aren’t a concern for this budget cycle because there are reserve funds that can help balance out the missing money. The problem arises when this pattern continues, Welch said.
City Administrator Kelly Madding said it’s clear organizations in town which are reliant on tourism need to put more “emphasize on the shoulder seasons.”
“If the summer before wasn’t a wake-up call, this last summer was definitely a wake-up call I think to both the chamber and the Oregon Shakespeare Festival on assuming that summer, or July and August, were going to be the busiest seasons,” Madding said. “There are people out there looking at the business model of tourism in Ashland to try to mitigate what might be a regular thing, which is smoke in the summer.”
Councilor Dennis Slattery agreed and commended the work in place.
“We don’t have a fire season anymore,” Slattery said. “We have the same conditions that can occur in April and we’ve seen it in November south of us. So, there is a lot of effort, energy and time spent trying to figure out how we are going to deal with these issues in a proactive fashion.”
Welch said overall the budget is on track as expected.
“Based on the current budget that was adopted, budget biennium 2017/19, we are in compliance and in almost every fund, we’re actually seeing positive results, so revenues higher than expenditures, things we want to see,” Welch said.
He said there is a $2 million deficit in the general fund, but that it can be balanced out with reserve funds. For example, he said property taxes received in November were higher than expected. So, these additional types of funds can be applied to the deficit and will cover it.
It’s only problematic, he said, if the expenditures continue to outweigh revenue in future years.
“Our expenditures have outpaced our revenue growth and that is one of our concerns coming up in the next biennium,” Welch said.
“When we look at performance on the budget, things look good currently,” Welch said. “But we know that deficit is an issue going forward. So, we know based on how we budgeted we are tracking where we want to be, but keep in mind we know we have challenges in the general fund.”
Citizens’ Budget Committee member Paula Hyatt said that healthcare is going up 5-6 percent a year.
“We have to be responsible to our employees and we also need to balance that with what we’re expecting of our taxpayers knowing that this expense is not going away. It’s going up,” Hyatt said. “So, what can we say we are tangibly doing now for 2020?”
Welch said the new healthcare provider, CIS, has allowed the city’s benefits package to remain as is until 2020. Welch said the city mandates departments build a reserve fund for the unknown impact when it’s necessary to enter into a new healthcare contract.
For more information on the transient occupancy tax, the food and beverage tax and other budget information, go to ashlandor.opengov.com and click on “stories.”