Humboldt County’s growing backlog of overdue financial reports is costing the county money, damaging its reputation and making it difficult to plan for the future.
That’s the message Chief Financial Officer Tabitha Miller delivered Tuesday in her midyear budget report to the Humboldt County Board of Supervisors.
The county is two years behind in submitting at least three of its state-mandated financial reports, making it difficult to provide the council with “timely and valid” tax information to guide decision-making, said Miller. A staff report also noted that the resulting lack of information increases the county’s risks of “significant and permanent loss of federal and state funding and fiscal instability.”
Among California counties, Humboldt is now “the last” to submit its 2019-20 financial transactions report to the state comptroller’s office. (The auditor says her staff are working to meet the March 16 deadline to avoid legal repercussions.)
The county has ordered a new credit report done later this month, and a bad municipal credit score could impact the county’s ability to borrow money and get grants. The resulting damage to the county’s reputation could negatively affect community partnerships and public perception.
“Something’s broken, and we need to fix it,” Miller said during his presentation.
However, it wasn’t all bad news. The county has roughly doubled its general fund balance over the past year, from $15.4 million at the start of the 2020-21 fiscal year to an ending balance of $29.8 million, although that Miller cautioned that these numbers are “unaudited, unreconciled, and not final” due to overdue tax reports.
Nonetheless, “it’s huge,” she said. “It’s a real benefit for the community. … But the challenge here is that I can’t necessarily say we can rely on those numbers.
The bad news came via a balance sheet from the county roads fund, which Miller said was $13.2 million in the hole yesterday (again, on paper at least). She added that there were “unaccounted receivables,” including relief funds from the Federal Emergency Management Agency, but the county is still considering a $6.5 million shortfall in its road fund.
More bad news: For the upcoming 2022-23 fiscal year, the county has a projected budget shortfall of $17.7 million due to a number of factors, including an increase in salaries and employee benefits. However, Miller noted that the projected $9.6 million increase in spending from salaries and benefits represents full employment, which the county is currently nowhere near — staffing shortages are an issue in almost all departments. The county will also see a reduction in Measure S cannabis tax revenue thanks to the council’s decision last month to give struggling growers a significant tax break.
To address this projected shortfall, Miller said staff will recommend covering a portion of employee salary increases and pension commitments from the general fund while limiting supplementary budget requests and budgeting for a vacancy rate of 10% employees.
“We know our vacancy rate — we will always have a vacancy rate, even in the best employment times,” Miller said, adding that it’s currently around 17% countywide.
Fifth District Supervisor Steve Madrone stressed the importance of road maintenance funding, noting that he receives more calls about it than any other.
Third District Supervisor Mike Wilson said aging county-owned facilities should also be considered given the difficulty of funding deferred maintenance.
Regarding the county’s overdue financial reports, Miller said the reporting requirements fall to the office of the auditor-comptroller and the county as a whole needs to come up with a solution, whether it’s ‘assign staff from other departments, remove some responsibilities from HQ or some other approach. She suggested setting up a committee to come up with a plan to keep abreast of the reports.
Miller received accolades for his concise and informative presentation.
Treasurer-tax collector John Bartholomew stressed the importance of tackling the county’s unfunded pension liability, saying he had been concerned about it for a number of years and was grateful for the new position of county chief financial officer.
First District Supervisor Rex Bohn suggested that Miller and county administrative office staff go ahead and create a task force to deal with late tax reports, noting that the county’s single audit for 2020- 21 is already late.
County Administrative Officer Elishia Hayes said she too had “very serious concerns that the 20-21 audit will be Continued overdue than ’19-20, which is already six months past the extended due date of September .”
The report to the Board of Directors was received and approved unanimously.
Transitional occupancy tax
Earlier in the meeting, the council considered whether or not to impose a measure on June ballots that, if passed, would increase the rate of the Transitional Occupancy Tax in unincorporated areas. county from 10% to 12% while making the tax applicable to the night. RV parks and some campgrounds.
The matter had been placed on the consent calendar, meaning it was to be approved without specific discussion or public engagement, but Second District Supervisor Michelle Bushnell withdrew it for discussion, saying she had received from many e-mails and phone calls from people who felt “taken aback” by the proposal.
Indeed, during the public comment period, several hotel industry representatives, including local hoteliers, expressed frustration with the county’s process and concerns about the proposed tax hike.
Julie Benbow, executive director of the Humboldt County Visitors Bureau, said while members of her organization support including RV parks and campgrounds in the tax base, they don’t think now is a good time to raise the 2% tax.
John Porter, owner of the Benbow Historic Inn and the Benbow KOA, complained that he and other hotel owners weren’t educated enough about it, and he pointed out that the county is already seeing an increase in revenue of its transitional occupancy taxes just because of inflation. and increasing room rates.
“The fact that the industry has not been informed and that no one has called us and spoken to us, you know, puts a bad taste in our mouths,” he said, adding that he and others may decide to launch a campaign to defeat the measure at the polls. “I don’t know what we’re going to do,” he said before running out of the three minutes allotted to him to speak.
Chuck Leishman, a marketing consultant with the Humboldt Lodging Alliance, said the tax would give an unfair advantage to hotels in incorporated cities, where the tax does not apply. (Cities create their own.) He, too, complained about the lack of notice, saying his organization hadn’t had time to call a meeting to discuss the matter.
Meanwhile, members of the local arts community have called in to voice their support for the tax hike, noting that some of the proceeds could be used to support the arts.
“I think the TOT tax increase makes a huge amount of sense for our community,” said Jacqueline Dandeneau, co-founder and artistic director of the Arcata Playhouse.
Leslie Castellano, Eureka City Council member and executive director of the Ink People Center for the Arts, said “investing in the arts is also investing in tourism.” She added: “More than ever, people are looking for authentic experiences where they choose to go, and arts and culture are determining factors when people are making decisions about where to travel.”
Council members wondered aloud if they could take more time to consider the issue while still having time to put a measure on the June ballots. However, after taking a short break to research the matter, Registrar of Electors Kelly Sanders advised the council that a decision must be made today as the deadline for action on the ballot is this Friday. .
Hayes, the county administrative officer, took the blame for the lack of public notification, saying, “The message was heard loud and clear today that my office could have done better by committing to this tax measure,” although she added that there is still time to get input on how the revenue should be spent.
Wilson said he supported putting the measure on the ballot. He also noted that many local homes are being converted to Airbnb rentals, depleting the housing stock and exacerbating homelessness and affordability issues. He suggested using some of TOT’s revenue to plan for increased hotel services in the county. He also noted that the council was simply being asked to let the voters decide the issue.
The motion to put the tax increase on the ballots was approved by a 4-1 vote, with Bushnell voting against.