Town of Truckee officials eye short-term budget plans amid COVID-19
The outbreak of COVID-19 and orders for non-essential businesses to close has town officials in Truckee looking to limit expenditures between now and the end of summer.
With closed signs hanging in business windows along with empty hotels and lodges, the town is bracing for fairly large reductions in two of its three largest revenue sources — transient occupancy tax and sales tax.
“We are having a hard time actually knowing what the fiscal impacts are going to be to the town,” said Administrative Services Director Kim Szczurek.
Transient occupancy tax and sales tax generate nearly $9 million annually for the town, but with most businesses closed, town officials are anticipating the possibility of roughly $2 million in lost revenue, representing around 10% of Truckee’s budget for the year.
Revenue generated by sales taxes, according to Szczurek, is the second largest general fund source for the town, which collected nearly $4.6 million in sales tax during the 2018-19 fiscal year. Szczurek said the town is estimating a reduction of around $1 million in revenue from sales taxes.
During the third quarter (January, February, and March) of the 2018-19 fiscal year, the transient occupancy tax, which is 10% of taxable rents on all short-term rentals in Truckee, generated $1,359,000. Revenue generated from transient occupancy taxes aren’t yet available for the third quarter of this fiscal year, according to Szczurek, but will include taxes from January, February and half of March.
The fourth quarter of the fiscal year lands during the shoulder season, and is traditionally the lowest in generating revenue from transient occupancy taxes. In 2019, $660,000 in revenue was brought in during the period.
While it remains difficult to quantify the financial impact related to COVID-19 moving into final quarter of the fiscal year, Szczurek said the town could be looking at around $1 million lost in possible revenue from transient occupancy taxes between the third and fourth quarters.
IN the short term
In the coming weeks, the Truckee Town Council will receive a budget likely focusing on the first three months of the fiscal year, which begins July 1.
Due to the financial uncertainty surrounding the outbreak of COVID-19, there likely will be no new town initiatives or programs, no employee travel, and no non-essential spending as part of the short-term budget for the upcoming fiscal year.
As of now, there aren’t plans to lay off any of the town’s 126 employees, eight of which are temporary or on call. The town, according to Human Resources Analyst II Bonnie Thompson-Hardin, doesn’t have any employees that are furloughed and has transitioned the majority of employees to working at home. The town also has four employees that have qualified for leave under the recently adopted Truckee Coronavirus Response Act Leave Policy.
The town’s top source of revenue for its general fund comes from property taxes.
While this fiscal year’s property taxes have already been collected, it remains to be seen how the effects of COVID-19 will impact property values in the coming years.
“That is the longer-term risk fiscally for the town, because that is our main revenue source,” said Szczurek. “If you look at the last recession and overlay it on where we are now, it would have a significant impact on town operations.”
Impacts on property tax revenues likely won’t be felt until when bills are paid in 2021-22, according to Nevada County Assessor Sue Horne.
“For those property bills that are coming out in October, that doesn’t reflect what the current market is,” said Horne, who added that impacts won’t be seen until the next assessments take place for bills that will go out in October 2021.
“That’s where you’re going to see the impact if indeed property values drop because people don’t have jobs, or people lost businesses — all of the fiscal impacts of this shutdown,” she said. “I don’t see a lot of fiscal impact regarding property values presently. Now, if people start losing homes because they can’t afford mortgages, then you’re going to see property values start to drop.”
A lengthy shutdown of much of the economy or businesses struggling upon reopening could have long-term impacts similar to what was seen during the Great Recession.
“If we have a similar scenario of what happened in 2008 when people started massively losing their homes, because they couldn’t afford the mortgages, then you’re going to see a repeat of what we went through,” said Horne.
“To what degree? That remains to be seen. We are really in unchartered territory here.”
Justin Scacco is a reporter for the Sierra Sun. Contact him at email@example.com or 530-550-2643.
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As COVID restrictions continue to rollback nationwide, tourism has started up again and is in full swing around Lake Tahoe.