By Rolf Boone

The Olympian

Coronavirus is not only a major health concern, attempts to slow its spread have caused serious damage to the local economy, closing businesses and forcing consumers to limit their spending to the essentials.

That means an expected drop in retail sales and a corresponding decline in sales tax revenue for Lacey, Olympia, Tumwater and Thurston County.

“Every local government is going to be watching this closely,” said Lacey Finance Director Troy Woo on Monday.

Each jurisdiction has a general fund budget, which funds the most common local government services, such as police, street maintenance, parks and administrative functions. And sales tax revenue is a significant part of it.

In Lacey, for example, sales taxes provide nearly 25 percent of its $52 million general fund revenue for 2020. Other sources of revenue for general fund budgets include property taxes and utility taxes. How those two categories will be affected by a slower economy is still to be determined.

City officials can’t project how far sales tax revenue might fall in their jurisdictions, but some remembered what happened following the housing-led financial crisis of 2008-2009.

By 2010, overall sales tax revenue fell about $1 million in Lacey, said Woo, who joined the city that year.

One major difference between then and now: The housing bubble burst over time, while the economic changes shaped by coronavirus response have been sudden, Woo said.

In the event that sales tax revenue falls sharply, Lacey and the county’s other largest cities already are taking steps to rein in spending to ensure city services are maintained.

Lacey City Manager Scott Spence told the City Council Thursday night that hiring has been put on hold and all city travel has been suspended. Woo said the city is looking at cutting back on non-essential spending. Lacey has two months of operating reserves on hand, he said.

In Olympia, interim City Manager Jay Burney said he expects sales tax revenue to fall and that revenue streams are being monitored closely. The city has instituted a soft hiring freeze — “no one gets hired without city manager approval,” he said — and all training and travel has been canceled. He also has asked department heads to reduce their discretionary spending.

“We will bend and flex and adjust accordingly,” Burney said.

Like Lacey, Olympia also has operating reserves on hand. About 10 percent of the city’s $85 million general fund budget has been set aside for that purpose, plus the city has another $8 million in what Burney called “budget stabilization” funds.

“Our No. 1 objective is to protect vital essential services,” he said.

Tumwater City Administrator John Doan offered a projection on sales tax revenue, saying it could fall in the range of 7 to 10 percent in Tumwater.

The city is watching its expenses carefully and also has a soft hiring freeze in place, he said.

“We are looking at every position,” Doan said.

The city’s general fund budget is about $32 million, and Tumwater also has reserves it can tap, he said.

“We have tools to stabilize the budget,” he said.

Thurston County Manager Ramiro Chavez said he couldn’t speak in great detail about the revenue impact caused by coronavirus because he is so focused on the crisis itself. One county department — Thurston County Public Health and Social Services — is on the front lines, tracking the illness daily.

Every day the crisis lasts, however, his concern about revenue impacts grows, he said.

“It’s going to be unprecedented,” Chavez said. “I don’t even have a point of comparison, but I am concerned.”

Lacey Finance Director Woo pointed out the county receives a share of the sales tax revenue generated by the cities.

“What happens to us, will happen to them,” he said.