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Clallam's budget less tight than expected

Half way through 2008, Clallam County's finances are going a bit better than anticipated, with some promise for years ahead.

County financial planners saw a dip in revenue for 2008 and planned for it. After a mid-year analysis, county administrator Jim Jones said the county is projected to spend about $1.28 million more than it has coming in, compared to early estimates that placed the deficit at about $2.4 million.

"The general fund is performing better than what was initially budgeted," Jones said. "The county plans for a very tight budget to keep expenses down in case revenues are not as high as we project."

The county has about $12.5 million in reserves, a number expected to go down to about $11.1 million by January.

While some projected revenues are slumping, others are on the rise but not enough to compensate for income losses and projected increases in expenses.

"To make these projections I have data sheets for each fund that compare projected budgets for this year, actual mid-year numbers for this year and mid-year numbers and total budgets for the last three years," Jones said. "Then I take a look at current conditions and make estimates based on that information."

Projections are not good through 2009. However, Jones sees big opportunities coming for Clallam County, such as infrastructure improvements, that may give it an edge over slumping state and national economic trends.



Revenues

Revenues are projected to dip in some areas of county finances, such as real estate excise taxes, funds from building permits and from sales taxes.

"We expected the dip in sales tax and budgeted for it, so we were prepared for that," Jones said. "And while we understood there was a slump in the building industry, it hit us harder than expected. Those two and the (real estate excise tax) are all intertwined."

With a lull in the real estate market, building stops. The purchase of building supplies is a huge contributor to the county's sales tax revenue.

"One thing we have seen, however, is a dramatic increase in the projection for property tax income," Jones said. "Property taxes came in about $100,000 higher than expected."

The county assessor's office has caught up with a backlog of construction assessments from 2007. Jones saw projected increases to timber tax revenues and a huge return of interest on money the county has in the bank, about $2 million.

"We knew we would be dealing with less income this year," Jones said. "But there are some expenses that jumped on us as well."



Expenses

The county cut some of its projected expenses for 2008. Simultaneously, however, the county incurred dramatic costs through the Clallam County Superior Court, to its risk management pool for legal expenses and for workers compensation claims.

"As for the court, we are doing what we said we would," Jones said. "We have a third judge and we are digging into that three-year backlog of cases."

As a result, the court has finished 241 cases within the first six months of 2008, many more than in previous years and the costs of juries and witnesses has used up nearly 95 percent of the year's allocations to the activity within the first six months.

"Commissioners will likely have to consider making an emergency budget amendment to fund trial costs through 2008," Jones said.

He said the heap of cases is getting cleared, but added that it would take time to get through what was a three-year backlog.

The increase to the risk management pool came from higher than expected expenses in defending the county against a land-use ruling handed down by the Western Washington Growth Management Hearings Board.



Future

Jones estimated if the county continued the same level of service in 2009, it would cost about $2 million more due to material and cost of living increases.

"My suggestion to commissioners will be to use reserves to cushion the impact for the next year while finding ways to reduce spending," Jones said. "I see promising times, perhaps a mini-boom, in about a year and a half."

He cited a number of infrastructure improvements and projects in the area, such as the Elwha River Dam removal and an eastern Port Angeles urban grown area sewer expansion.

"When are things going to get better? Well, on the national scene, maybe three years or more," he said. "But Clallam County is a bit unique in that we have so many projects lined up with funding, much of which will be spent locally."

He said if the county dips into reserves for one or two more years, the payoff would be better than laying off workers now and having to refill the positions when activities pick up again. He said he wants $5 million as a minimum in reserves.

"The whole reason we have high reserves is we didn't spend the income from the building boom," Jones said. "We really tried to tough it out under the 1 percent property tax increase while saving what we could for when the hammers stopped pounding, and that time is now."

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