Sales tax in the Haines Borough this year is down 31% through August, according to a recent report. The borough had collected $1.7 million in sales tax by the end of August this year, compared to $2.4 million by the same time in 2019.
According to the report, sales tax revenue for January, February and March of 2020 was on par, even slightly better, than sales tax collected during the same months in 2019. A drop-off in sales tax began in earnest during the summer months. July saw the biggest decrease so far of any month this year with a decline of 48%.
In a normal year, the community receives a significant boost to sales tax from the influx of summer tourists and seasonal workers during cruise-ship season. This year, the COVID-19 pandemic and mitigation measures designed to slow its spread resulted in the cancellation of all cruise ship sailings. The continued closure of the Canadian border prevented RV and cross-border tourism.
Anticipating a significant drop in sales tax as a result of COVID-19 in June, the assembly approved a budget that anticipated a 50% decline in sales tax revenue for the fiscal year beginning July 1 and ending June 30, 2021.
Cuts to accommodate anticipated revenue loss this fiscal year included reductions to funding for the Mosquito Lake Community Center, the Haines Sheldon Museum and the Haines Economic Development Corporation, pay freezes for non-union positions, a one-week unpaid furlough for all employees, a boroughwide freeze on travel, summer pool closure and Friday closures at the library.
While 31% marks a substantial decrease, unless sales tax for the fall and winter is significantly worse in comparison to last year, it’s likely the borough will have more money on hand than assembly members anticipated when they put together the budget.
“If the current trend in spending continues through (the current fiscal year), we will have less of a hit to our fund balance,” assembly member Cheryl Stickler said. “Our new assembly will be establishing budget priorities to guide our decision-making soon… I think we can expect our focus to be on generating revenue while being fiscally responsible.”
In interviews, assembly members said it’s likely any excess revenue will sit in savings for use in next year’s budget.
“The thought right now would be if we don’t hit fifty percent, if we’re under that, we can use it for the anticipated shortfall next year, which is pretty much a given,” assembly member Jerry Lapp said.
Lapp said conversely, if winter sales tax ends up being worse than anticipated, it will make balancing next year’s budget all the more difficult. “We are going to have to look for another way to make up funds,” he said.
Assembly member Carol Tuynman said it’s too soon to say what pandemic sales tax numbers will look like next June, or how it will impact budget decisions. She said when the time comes to make budgetary decisions, it will be important for the assembly to consider the borough’s broader economic picture, not just sales tax revenue.
“How many items that were in the (Capital Improvement Projects Fund) and other budget considerations have ended up being covered by the CARES Act?” Tuynman said, referencing the borough’s new ambulance. “Of the four million (in CARES Act funds) a substantial amount ended up going toward borough expenses. I think it’s important to not just look at one column.”
The next borough budget cycle will kick off on April 1, 2021 when the manager releases a first draft. The budget for the fiscal year that begins June 30, 2021 must be finalized no later than June 15.