Auburn Mayor Nancy Backus has asked Gov. Jay Inslee to restore streamlined sales tax mitigation funds to the city as it deals with projected revenue deficits of $6 million to $9 million this year because of the COVID-19 pandemic.
Inslee last month vetoed numerous bills approved by the Legislature this year in an effort to reduce state spending because of the coronavirus outbreak that will take away state tax revenue. House Bill 1948 allowed the mitigation payments to continue through 2021. Auburn receives about $2 million a year from the state in mitigation payments.
“I ask that you consider rectifying the portion of the veto that eliminated the 2020-2021 mitigation payments so that as we work towards recovery from this pandemic we can continue modeling our budgets that accounted for these dollars,” Backus said in an April 20 letter to Inslee.
The mitigation funds were initially set up by the state in 2008 to help compensate Auburn, Kent and a couple other cities for revenue lost when legislators changed Washington from an origin-based system for local retail sales tax to a destination-based system, which took away city tax revenue from the many warehouses in Auburn and Kent.
The city of Kent will lose about $4 million per year in streamlined sales tax mitigation funds, according to the city Finance Department. Kent city leaders, however, didn’t include those funds in the 2019-2020 budget because of previous efforts by the Legislature to stop the payments. Kent planned to use the money on capital projects, such as park improvements.
Auburn included the $2 million in its general fund. The city will receive two payments this year but the funds will stop in June.
“We were anticipating that HB 1948 veto may come, but we were unprepared for immediate stoppage of 2020 and 2021 SST mitigation payments,” Backus said in her letter. “In Auburn, this will result in and estimated loss of $2 million to our general fund. This was an extra blow to our already strained resources we did not expect.”
Mike Faulk, deputy communications director for Inslee, said in an email that the governor had hard decisions to make about budget cuts.
“The decision to veto was not taken lightly, and many of the tough choices local governments are facing right now are similar to the ones state governments are facing,” Faulk said. “The governor also said he would support local officials’ calls for additional relief packages from the federal government. We want to help families, businesses and local governments all recover from this crisis.”
Backus had a brief phone conversation with Inslee on April 22 as he talked with several mayors about a variety of topics.
“Gov. Inslee promised that he would look into the cuts and get back to us, but no promises of restoring at this point,” Backus said about the conversation.
Backus described in her letter to Inslee what the city faces.
“Like all municipalities, we are losing significant revenue from various taxes, fees, permits, services and programs,” she said. “We are currently projecting lost revenue of $6 million to $9 million in 2020 alone from the COVID-19 crisis and we are currently in the midst of making difficult service cut decisions. The additional $2 million loss in SST mitigation revenue exacerbates our current and long-term financial projections. This will cripple any efforts we may be able to extend to our small businesses, residents and our own municipality to recover from this crisis.”
The mayor added that the city already has made layoffs and more could be coming.
“So far, we have laid off 130 temporary and variable hour employees, frozen hiring on 15 full-time positions that are currently open and will freeze any vacated position until further notice,” she said. “Our next phase we recently announced to our employees to mitigate our losses will include examination for reductions in expenditures, offering of early retirements, mandatory furloughs, suspension of VEBA (Voluntary Employees’ Beneficiary Association) payments, offering of voluntary layoffs and possibly forced layoffs. It is incredibly disheartening for me to have to deliver this news to our workforce.”
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