While sales tax revenue for the city of Anacortes has declined because of the COVID-19 pandemic, reduced spending and increases in other revenue sources are helping the city weather the financial hit.
Sales tax revenue for March, which was received by the city last week, was 19% less than expected, a decrease of about $77,000, Finance Director Steve Hoglund said during a virtual Anacortes City Council meeting Tuesday evening.
However, the second half of March — when business shutdowns began — showed a larger drop of 37% less than expected, Hoglund said.
The city won’t know the full financial impact until June, due to the two-month lag between when sales tax revenue is generated and when local governments receive their share from the state.
“Our downtown was shut down, I don’t want us to have any expectation that it will be anything but dismal,” Mayor Laurie Gere said at the virtual meeting.
Gere said the city has found $2.1 million to cut from its budget to help mitigate the drop in sales tax revenue.
Hoglund said the budget cuts will not impact city staff.
Lodging tax — a fee paid on hotel and motel room stays — was also down in March, April and May compared to last year. From May 2019 to May 2020, there was a 71% decline, according to the city’s presentation.
Other funding sources — utility taxes, building permit fees, and real estate excise tax on property sales — all showed an increase over last year, according to the presentation.
Though construction was shut down when the pandemic began, it doesn’t appear to have slowed development in Anacortes.
Hoglund said by the end of April, the city had issued nearly half the building permits it had issued in all of 2019.
As parts of the economy reopen, the city’s sales tax revenue may rebound, but just how much depends on how much consumers spend.
Skagit County had an unemployment rate in April of 19.1% — the third highest in a state — meaning consumers will have less money to spend.
How reopening the economy will impact retail sales will not be known until late summer, when the city receives tax revenue from the prior two months.