IRON COUNTY — At the last Iron County Commission meeting, County Auditor Dan Jessen provided an analysis of potential financial impacts to the county as a result of the COVID-19 pandemic.
Jessen said there have been several questions and concerns raised regarding the potential impact on the local government and economy. While it varies in every city, county and state, Jessen said it’s important to know which of the county’s revenue sources could be affected and how.
“We want to keep an eye on this and make sure we don’t get caught shorthanded and behind the curve, trying to react too late and have to do layoffs or something like that,” he said at the April 13 meeting.
Jessen discussed several of the uncertainties surrounding the pandemic, such as what consumer trends will look like as the economy opens back up.
“If everybody goes into a wait-and-see mode, then what happens is it literally creates the recession – it’s a downward spiral,” he said. “Then as businesses don’t have the revenue then they have to lay off more; that’s how recessions start. It’s a domino effect. … It’s easy to see the things that are right in front of our face, but it’s hard to know the side effects that are going to circle back around.”
Jessen said the impact on Iron County’s economy will result largely from how the county’s revenue sources are impacted, specifically the sources that are more dependent on the market and consumer trends.
The county’s revenue is generated largely through grants, fines and fees, property taxes, interest income, tourism taxes, sales taxes and payments in lieu of taxes. Of those, Jessen said, the sales and tourism taxes are the most concerning currently due to the dependency on the market.
“Sales tax is the biggest concern by far,” Jessen said. “Sales tax is directly tied to consumer spending. … We know that this will take a hit.”
Although the overall impact on sales tax will be negative, Jessen said not every business and industry will be negatively affected, and there is still uncertainty regarding whether people will choose to save their money or spend it as the pandemic subsides.
Regarding the tourism taxes, Jessen said there may be “pent up demand” for travel and hotel rooms, but the tourism bureau’s budget also will likely be impacted negatively. Although people may have the desire to travel as quarantine becomes less necessary, the effect of potential fear and social distancing practices on summer events in Iron County is uncertain.
“We’re just going to have to play it by ear and be very cautious, but we do need every penny that we have to try to stimulate the economy, try to get people to do tourism when that is available,” he said. “There is a demand that happens, hopefully people will resume and (will need) to get out of the house after they’ve been pent up.”
Jessen said the gas tax – and subsequently the municipal service fund – will be impacted by the pandemic as well.
“Regardless of what’s going on with gas prices, what affects Iron County’s revenue, and hence how we’re going to repair the roads, and we subsidize it with our general fund — that’s why this is so important — is how many gallons are being bought,” Jessen said.
Jessen explained that gas prices have lowered due to low demand and high supply and said that as preventative measures are lifted, there may be an increase in gallons purchased compared to previous years.
“A lot of those gallons are bought by tourists, and if those tourists aren’t driving, then it will impact us,” he said.
He added that the gas tax is currently providing about $2 million to the county for road repairs, which the county subsidizes with an additional $1 million.
“If we take a hit there that means it’s going to have even more of a burden on our municipal services fund, which is what we largely subsidize our road fund from.”
Jessen also discussed revenue from building permits, which is directly tied to the local housing market and how many new homes are being built. The 2008 recession resulted in a $700,000 decrease in revenue from building permits being added to the municipal services fund.
“This is real money,” he said. “This goes into the general pot that is a municipal services fund that we fund our sheriff’s department and our building maintenance and our building inspector, and we have a bunch of things that are located in that fund.”
Jessen outlined several potential scenarios of what the impact of COVID-19 may look like for the Iron County economy, including one similar to the 2008 recession.
“Yes I’m worried, but I’m not panicking. We’re, largely speaking, very healthy overall as a county,” he said. “Here’s the problem: We have 26 different funds that all have their own unique sources of revenue, and some funds are going to be more sensitive to this than others.”
He added that Iron County is financially strong currently.
“We have been paying off debt and filling our allowable savings and our reserves,” Jessen said. “We are, financially, probably stronger than Iron County has ever been.”
Jessen’s recommendation to the commissioners was to be cautious moving forward and only make necessary expenditures but not make drastic changes to the 2020 budget.
“Hopefully there’s enough of a picture developing when it comes budget time in the fall, that we can get an idea of what is going to happen in 2021,” he said.
While the future may be uncertain and caution is being recommended in regard to expenditures and the budget, county commissioners moved forward with drafting a statement requesting Iron County be excluded beyond May 1 from future extensions of public health orders issued by the Utah Department of Health.
“We greatly appreciate the input of experts and professionals who help us make local decisions in the best interest of public health and safety,” the statement, which is signed by all three county commissioners, said.
The realities of Iron County’s rural location and relatively sparse population make it less vulnerable to the outcomes seen in more densely populated areas. … Our curve has not only flattened, but has been eliminated before it could start. Due to the substantial difference in impact between our community and more urban areas, we urge the Department to avoid a one-size-fits-all approach.
The statement goes on to specifically request local restaurants be able to reopen while implementing “as many recommendations as practicable” from Gov. Gary Herbert’s “orange/moderate” designation that he specified in his “Utah Leads Together 2.0” plan, which was announced Friday.
The color-coding system allows for some counties to be one color while other areas can be at a different phase with fewer recommended restrictions. The orange designation would allow for some relaxing of closures for individuals who are not high risk and would permit dine-in restaurant services as long as they take substantial distancing and cleanliness precautions.
Copyright St. George News, SaintGeorgeUtah.com LLC, 2020, all rights reserved.