Borough predicts $17.2 million loss in revenue

Apr 21, 2020


With businesses shut down or slowed down due to the COVID-19 pandemic, that doesn’t just hurt employees and owners, it hurts the local governments that rely on sales tax revenue generated from those businesses.

In the Kenai Peninsula Borough, that also hurts the school district, as sales taxes are the pot of money that’s used to fund schools. The Kenai Peninsula Borough Assembly and KPBSD Board of Education held a joint work session Monday afternoon to discuss the numbers.  

Borough Finance Director Brandi Harbaugh painted a bleak picture.

"We estimate between 15 and 30 percent reduction in sales tax revenues over the next year and that coincides to a fairly large number for the borough. We’re looking at approximately $5 million loss at the end of this fiscal year, which we did not budget for. And then an additional $6 million to $7 million in next fiscal year. So, we anticipate a 15 percent reduction next year and then it slowly recovers over the next 24 months and it actually relates to a little over $11 million sales tax loss,” Harbaugh said.

The borough is also bracing for a dip in property tax revenues. Probably mot much this fiscal year, as the due date for property tax payments already came and went. But Harbaugh said they expect an 8 percent reduction in collections next fiscal year. Together, the borough forecasts a $17.2 million loss in revenue over the next four years.

“That does not take into consideration any losses related to the state budget, the vetoes and those types of things. The governor also looked to veto the debt reimbursement, as well as revenue sharing. That’s approximately $13 million on top of that $17 million if that were to continue over the next four years, as well,” Harbaugh said.

Mayor Charlie Pierce said the borough is able to absorb the financial hit for now from fund balance, which is essentially the borough’s savings account. At this rate, though, fund balance will be the lowest it’s ever been.

And that’s not to mention the costs that could come along if Seward has another flood or if there’s another wildfire on the peninsula this year.

“We could spend a million dollars in either one of those events, as well. We have to actually have that money available to cover those bills when it occurs,” Pierce said.

Pierce said he’s hopeful some of the borough’s lost revenue and costs in responding to the pandemic will be reimbursed from federal relief money but the bills have to be paid first and reimbursed at a later date.

“It’s challenging and I think that we can all look at each other and say we’ve done a good job of creating some fund balance for these types of events. And we’re going to try to recover some of that through federal reimbursements. If we get those moneys, it will help in the out years as far as mill rates and fund balance,” Pierce said.

The assembly meets at 6 p.m. Tuesday via Zoom conferencing. School district funding for next fiscal year is on the agenda, as is the return of the gated subdivisions ordinance, which was postponed from the March 17 meeting.