Shutdown could mean million-dollar hit to Gig Harbor city budget

If the coronavirus shutdown lasts as long as two months, Gig Harbor could lose more than a million dollars in sales tax revenue, Mayor Kit Kuhn said last week.

Sales tax is responsible for around 60 percent of the city’s revenue, Kuhn said. With the growing expectation that the governor’s stay-at-home order will last at least through April, Gig Harbor could lose an estimated $1,172,550 from its 2020 general budget.

The city is already scrambling to find ways to deal with the expected budget dent.

“We had to identify various places in our budget where we can make up that shortfall,” Kuhn said. “We have identified various items and projects that total just over $1 million that we can put on hold in the current budget. It will have no impact on the current service levels.”

Some items that are put on hold include additional body cameras for police, an additional patrol car, a municipal street cleaner, and much more.

Two of the city’s most-anticipated projects, a new sports complex and a floating dock for canoes and kayaks, will probably survive, at least so far.

Some projects, such as the sports complex, can be moved to a different account. And the city has some rainy-day funds it can draw on.

As an example, Kuhn said, a payment due on the city’s vactor, a big truck which vacuums the storm water drains, will be taken out of the equipment reserve fund, rather than the general fund.

No layoffs anticipated

Kuhn said that over 65 percent of the city’s expenses are wages and salaries, and he doesn’t want to lay off any workers. Nevertheless, said city administrator Bob Larson, there are some savings that can be made in that area as well.

“We have got current vacancies in unfilled new positions that we will put on hold,” said Larson. “That was not included in the little over a million we are currently going to save in this year’s budget by delaying projects.”

Although some businesses are still continuing to operate, Kuhn said the sales tax the city will receive from them is minuscule.

“It’s very small,” Kuhn said. ”You have a restaurant, and all they can do it take out. They probably can’t even safely do cash, so it really narrows down. The businesses that are opening are doing a fraction of what they normally do.”

The city of Gig Harbor received an estimated sales tax of $7,063,579 in 2019. That averages out to about $586,277 a month.

This is not exact per month, however, as Larson said the amount of sales tax the city receives fluctuates depending on the month.

“For instance the winter months does not bring in as much retail sales tax in some sectors as the summer months,” Larson said.

Big-box stores top list

General merchandise stores brings in the most sales tax for the city, with 18 percent of the total coming from this category in 2019. Other high-percentage categories include construction and accommodation and food services.

Restaurants, badly hit by the coronavirus shutdown, aren’t broken out separate in the tax figures, but the category under which they fall, Accomodation and Food Services, brought in $825,177 last year. That figure could drop sharply.

The mayor said there is no way to know the exact impact this will have on Gig Harbor, as no one knows how long the virus will last. Kuhn added that after recessions, many businesses don’t come back right away.

The mayor and city administrator shared a spreadsheet with The Gateway that shows some of the proposed projects to be delayed or postponed.

Among them are an exercise “pump track” in a city park, a waterfront fuel dock, a kayak storage structure at Ancich Park, and completion of the marine rail carriages at the Eddon Boat Yard. Together, delaying this projects will save about $672,000, the city estimates.

Some street projects, including upgrading the driving entrance to the Harbor History Museum, can be done in-house by city crews. Work on rehabilitating the brick house at Eddon Boat Yard can be continued using park-impact funds released by the delay of other projects.

A downtown parking study that would have cost $30,000 is to be delayed until the next budget cycle.

The police department will give up some desired equipment. Besides the additional patrol car and an emergency radio trailer, it will lose some additional body cameras and fingerprint scanners. The Public Works shop will make do with some security cameras overdue for replacement.

An open position for a planner in the Planning Department will not be filled for four months.

This story was originally published March 31, 2020 at 12:00 AM.