Sonoma County, Santa Rosa, face budget shortfalls from fires

Sonoma County and Santa Rosa leaders began to publicly consider Tuesday how they will address the multimillion dollar budget shortfalls their governments will face because of the October wildfires, even as much about the financial impacts of the disaster remains uncertain.

At the end of the current fiscal year, the county will see a projected $21 million budget gap. The city has yet to fully crunch its figures, but is estimating a ?$5 million revenue shortfall this year and millions more in unanticipated expenses.

Both projections stem from expected fire-fueled revenue declines and cost increases, as the disaster erased millions of dollars in anticipated property tax revenue at the same time the local governments had to invest heavily in staff overtime and additional resources to handle the emergency.

And the financial squeeze is expected to continue for the foreseeable future for both governments, with the county forecasting shortfalls north of $20 million through the 2021-2022 fiscal year. Santa Rosa estimates $11.5 million in revenue losses over the next two fiscal years, the largest ones being in sales, bed taxes and property taxes.

“We have a steep road ahead of us,” said Sonoma County Administrator Sheryl Bratton.

To address the fiscal challenges, the county and city are considering a variety of measures, namely an aggressive pursuit of state and federal funds, tapping into reserves, reallocating current spending levels and limiting cost increases.

But the early forecasts presented to the Board of Supervisors and the City Council have not yet been able to account for some important details.

Perhaps chief among the unknown factors is how much of the estimated $750 million Sonoma County debris removal cost will need to be paid by local governments. The county and city could be responsible for another $9.4 million to $23.4 million each, depending on whether the federal government agrees to cover 75 percent or 90 percent of the total cost, county staff estimated.

Supervisor David Rabbitt voiced frustration at the lingering uncertainty on that front. He noted the federal government already agreed to pay for a greater share of the debris removal work in Texas and Florida after the recent devastating hurricanes there, but more than two months after the Northern California wildfires local officials still do not know how much they will have to pay.

“That is just egregious,” Rabbitt said. “Politics should never play a part in a disaster, but seemingly, the conclusion is, it has.”

Federal Emergency Management Agency spokesman Frank Mansell stressed the federal government had quickly issued disaster declarations for the county and agreed to cover all of Northern California’s “emergency protective measures” for 30 days after the disaster erupted. Additional federal resources for debris removal was still an option, he suggested.?“No two disasters are alike,” Mansell said. “We do everything we can to look at all the facts before those decisions are made … There’s a process for all of this.”

Local governments will eventually receive reimbursements from FEMA for at least some disaster costs, but possibly not for years, after which they are still subject to audit from the Department of Homeland Security inspector general’s office, county officials have said.

Separately, the county is working with the office of state Sen. Mike McGuire, D-Healdsburg, to seek state reimbursement of the expected property tax losses, currently estimated at about $18.4 million this fiscal year among all local taxing agencies.

“Our snapshot today, if I had to give it a grade of how complete it is, I would say we are somewhere in the 65 to 70 percent of understanding of the full picture,” said assistant county administrator Christina Rivera. “There’s so much that we don’t know yet.”

Supervisor James Gore acknowledged the county was put in a “really tough place” by the anticipated budgetary impacts, although he said the debris removal efforts and insurance reimbursements should bring millions of dollars into the region - just not directly to local government coffers.

“At the same time, we need to be focusing on hire local, spend local, buy local,” Gore said.

Santa Rosa CFO Debbi Lauchner stressed to the council that the revenue declines are still very much “conservative” early estimates. The expected sales tax loss of $4.2 million over two years was based on the value of the sales taxes generated by the approximately 30 businesses destroyed by the fire, including three hotels and a Kmart.

“We don’t anticipate (we) will lose 100 percent of the sales tax from those business,” Lauchner told the council.

Some revenue will likely shift to other businesses, and some businesses might see tax increases as people make replacement purchases for big ticket items like cars, for which Santa Rosa serves as a regional sales hub, she said.

That could result in increases to offset the losses, but it’s too soon to say for sure. Typically, a city gets a sense of its sales taxes revenue ?30 days after the end of the quarter.

“It takes some time to get data to look at,” she said.

You can reach Staff Writer J.D. Morris at 707-521-5337 or jd.morris@pressdemocrat.com. On Twitter @thejdmorris. You can reach Staff Writer Kevin McCallum at 707-521-5207 or kevin.mccallum@pressdemocrat.com.