After public comments, county budget gets last-minute changes

The Oregon Legislature approved use of transient lodging taxes to pay for public safety. Should Lane County start using those TLT funds for rural patrols? With the background Tuesday, June 23, County Administrator Steve Mokrohisky:

Steve Mokrohisky (Lane County, administrator): Just a few comments to set the stage. I want to thank everyone who attended today and at prior meetings to provide public comment. Personally, very much respect the feedback that we’ve received from folks in the travel industry.

I want to share maybe just a little bit of walk down memory lane. I was hired back in 2014, and one of the primary things that I was asked to do when I was hired in 2014 was help an organization transition and transform from having laid off over 200 people, having cut services significantly, continuing to deficit-spend, and an organization that had lost a fair amount of public trust.

I very quickly came to understand that the fundamental challenge that this institution faces is the comparatively low— what I call an artificially low—permanent property tax rate. And I know this sounds like a broken record when we talk about this, but it is the issue we can’t get away from.

Lane County, there’s no other county with the geographic size, the population size and density, the mix of urban and rural, the 5,000 square miles that require us not only to provide intense services in a dense metro area, but also services to far off—

You heard from a resident who attended today from the McKenzie River. It takes over an hour to get to the coast. It takes over an hour to get to the peak of the Cascades. So we are very unique in Lane County in terms of our geographic size, our population, our density, our mix of urban and rural.

And the fact that we have such a low permanent property tax rate is a reflection of the fact that we relied so heavily on one industry, the timber industry, for decades. And that funding helped to support public safety services and road and bridge services, right?

And we all know the story: That funding goes away, property tax caps go into effect in the mid-90s. We get some federal entitlement payments for about a decade in the early 2000s via the Secure Rural Schools program. That helps to stabilize and keep things somewhat stable, but the funds continue to decline.

If you look back today, that’s about a 90% decline in that funding. It’s $40 million today, $40 million of funding, and the general fund and the road fund wiped off the books, just from the Secure Rural Schools funding.

So when we look back at 2012-13, right before I came, that’s what the county was reconciling with, was major layoffs, major cuts in services, an imbalanced budget, reserves that were being depleted because we were deficit-spending, a bond rating that was lower than it should have been.

So we very quickly set out a path to get our financial house in order in Lane County. We turned ourselves inward and said, If we’re going to build public trust what we need to do is get our financial house in order. We can’t change the fact that we have one of the lowest permanent property tax rates in the state; our public safety system, our road system is is chronically underfunded.

We can’t change that directly without support from voters, but we can begin to rebuild our financial stability and the trust that the community has in us for doing the basic things right. That’s what we’ve sought to do over the past 12 years.

So we’ve gone from deficit spending to structural balance. We’ve gone from depleting our reserves and not having financial reserve policies to building reserves. We’ve gone from no financial policies to having financial policies. We now have a 20% reserve in the general fund.

That is new. That is a new thing. That is based on the Government Finance Officers Association, national association, benchmark best practice to have a 20% reserve. And we’ve standardized all that throughout our reserves.

Since 2014, we’ve increased our bond rating twice, from a AA3, then to a AA2 in 2017, then again in 2019 to a AA1. We have the second-highest bond rating offered by Moody’s. The only reason we don’t have a AAA, which is the highest bond rating, are factors outside of our control. There are community factors that we need to continue to work on…

They love the fact that we have reserves that are stable. They love the fact that we have a plan that when we do use one-time money, like was proposed in this budget proposal, that we have a plan, right? That it’s a bridge towards a plan, that we don’t deficit spend without any plan in place.

So my hope is that bond rating continues. I’m worried, frankly, as your chief budget and financial officer for Lane County, I’m worried about putting at risk our financial stability.

I want to make a few clarifying comments for the record. Again, I want to say, I very much respect the comments and the perspective and the advocacy of the folks that have been in the room.

We’ve been very transparent about this process and the potential use of transient lodging taxes, going back at least six months in public meetings where I’ve sat in front of the board in public meetings and asked for in December, in January, in numerous meetings, and said, ‘If the legislature approves use of TLT for non-tourism related operations, do you support commissioners using that to help support public safety?’

And the answer I got was a resounding yes, with one exception. There’s one commissioner that did not favor that, but four of five commissioners did. So we’ve headed down this path, not to pit the lodging industry against public safety—

You know, it hurts me a little bit, I will say. The fact that I’ve worked with any of these folks for 12 years. I met with Brian Obie on May 4 and told him directly in a one-on-one meeting what the budget proposal was going to be, and he expressed no concerns, but then showed up in the public meeting to say that I should be ashamed of myself for making a proposal that we’ve been talking about for six months.

So, despite those types of comments, I want to root us—and the board has every ability—you are the policy body. You certainly can reverse this proposal. The sheriff said it’s his job to tell you what his needs are. It’s my job as your budget and financial planning officer to advise you on the things that are in the best interest of Lane County as an institution.

I wish that we didn’t have to consider use of TLT. I’m glad that we’re not in the position Deschutes County is in, where they’ve spent $6 to $7 million per year since the 70s—for over 50 years—of transient lodging tax on public safety. I’m glad that we’re not in that position.

So we’ve spent over 50 years not using TLT, but we are very transparent when the board established its legislative priorities and principles, going to the legislature and advocating for this. Because we need flexibility. We were transparent in our public meetings and asking for board direction before we made the proposal. We lobbied the legislature for this change.

And I want to clarify, because the comment’s been made several times, that the Public Safety Funding Task Force did not recommend use of TLT. That’s not true. I attended almost all of those meetings. You attended almost all of those meetings. It’s in the report. I’ve held it up. They specifically said—

One of the early questions that was asked, from representatives of the business community, from representatives who are members both of Eugene Chamber and the Springfield Chamber, they brought up the need to look at revenues that exist before asking voters for new revenue, specifically transient lodging tax.

And the staff in those meetings advised the Public Safety Funding Task Force of 11 residents not to make a firm recommendation to use transient lodging taxes for public safety, because at the time, we didn’t have the authority. And we said, ‘It wouldn’t be wise for you to make a firm recommendation to use something that we actually don’t have the legal authority to do.’

But they strongly recommended we pursue that course, that we seek legislative change, which we did. And if we got legislative change, that we use TLT before considering asking voters.

So I fully understand and respect the concerns expressed here today about the decision made by the board three years ago. And I think it’s also important to recognize that the environment that we’re in today and what has happened over the past three years has changed. So I want to be careful about not rewriting history, but actually telling history as it happened.

So this was a bridge. This is not use of one-time funding for ongoing operations without a plan. The board has specifically asked for, until we can get to a place that we can engage in a long-term solution with the community, we need a bridge to be able to continue to fund rural patrol for the next two years. So that’s what this is intended to be.

Whether you use general fund, road fund, you go below your 20%, or you stick with this proposal, any of those options you can do. But the plan is: use a short-term use of one-time funding as a bridge to get to a long-term solution. That has been one of the foundations of the things that we have changed here that we no longer just throw reserve money at operations.

We say if we’re going to use it, we need to have a plan in place.

Presenter: Commissioner Pat Farr:

Commissioner Pat Farr. As we move forward, I’d like to say I don’t take exception with the budget that was presented to us, and I don’t criticize the thought process that went into the budget. As I make the recommendation that I’m going to make, it really takes into account that you have done the very best to present us with the budget within the policies that we have.

And that being said, Chair, what I would like the Board to consider is reducing the general fund reserve to 18.5% and using the balance up to $6.5 million from road fund to replace the reduction in transient lodging tax reserve that had been generated by the 2% lodging tax that we passed in two years ago.

So the exact wording, that I’ll give you, but that is my proposal, 18.5% in general fund reserve and the balance out of road fund, to cover the entire budget as presented by Mr. Mokrohisky.

Presenter: Commissioner Laurie Trieger:

Commissioner Laurie Trieger: I’m frustrated that we are being presented with making such a solemn and important decision at the 11th hour, after months and months and months of a great deal of work on behalf of staff and department directors and our community members on our Budget Committee.

I appreciate all of the administrator’s comments. A lot of them reflect some of the notes and things I wanted to call out in terms of some of the misrepresentations of fact. And I just want to say, this is a really important moment for us about governance, about good governance. And the legislature exercised good governance in creating more flexibility for local governments all over the state who are faced with these really untenable decisions around funding core services.

There is some wisdom from farming community that says you don’t eat your seed corn. To me, that is what dipping into reserves is. It feels irresponsible when we have a fund that we have been gifted. The opportunity to exercise good governance and have flexibility by the state legislature, to set that opportunity aside and dip into our seed corn feels really irresponsible and like it’s not good governance.

I respect the advocacy. I have been an advocate for many, many issues over many, many years. But the advocates are always right and working on one issue at a time. Our job is more complex, and we have greater accountability to far more constituencies than to advocates.

This is not about all TLT. It’s a discussion over a portion of a portion. I’m a huge fan of doing what we can to bring more indoor play and practice space to this county, and we have embarked on a good-faith effort to see if that is viable or feasible.

But there is currently no actual project. There is no location decision. There is no pro forma. There is no operator. There is no other financial backing that has been identified that would make up the vast majority of what it would take to build such a thing. There is no significant concrete progress on a concept that was floated decades ago and has not gained traction.

But there is an evident lack of available resource to fund core services. And I just cannot in good conscience let safer communities go wanting and risk our own financial stability as an organization and let that money go.

Presenter: After discussion and amendments, a summary from Commissioner Laurie Trieger:

Commissioner Laurie Trieger: (Other than using transient lodging taxes) the difference between this motion and what’s in the budget, we’ve now reduced our commitment of rural patrol down to one year from two…

So we are preserving funds for a project we have not yet committed to, voted on, heard about, but we’re reducing our general fund reserves below what is generally recognized as standard best practice and we’re reducing our commitment to rural patrol by a year.

Presenter: Commissioner David Loveall:

Commissioner David Loveall: Obviously, this is a hard place to be. I don’t want to diminish the fact that people might be losing their jobs, but we’re in a countywide, statewide, nationwide series of retraction. We’re coming back. We’re going to have to tighten our belt, start again, make new visions and new goals. And this may be part of that.

And right now, the most important part of us as a board, as I would like to remind our board members, is: Our public safety is paramount. If we don’t have the public safe, we don’t have a community. So this (amendment) is a way to fund public safety. It gets us in a sense of urgency to bring us back to the table to find permanent solutions. It keeps our word with the travel entity.

And I want to add a comment, too, that Commissioner Trieger said that there was no plan about the TLTs (transient lodging taxes) and the Travel Lane County’s winter sports arena. I think that’s a mistake, and I think that’s a mistaken statement. They’ve had different tours of sites. They have sites available. We’re doing a feasibility study.

And the thing that’s lacking in pushing the winter sports arena forward is a commitment from the county to the funds they already have to back an idea. That’s what’s holding us up.

Being part of the Travel Lane County Committee, I know this intimately. Travel Lane County is willing to put $2 million into this of their own reserves. They’re committed to the process. They just need the county to come to the table and commit to the process with them.

And then we can go on to some economic development and actually make some money in this county.

Presenter: Commissioner Heather Buch:

Commissioner Heather Buch: I’m going to support this motion. I think it leaves some outstanding issues for us as a board to deal with in the near future, which is: We all have a commitment to continue rural patrol, and so we’re going to have to deal with that in the next budget cycle, obviously, since this will be one year.

And then we’re going to have to revisit our commitment for the courthouse and its ongoing planning and funding for updates. So I would just say we need to make sure that that’s on our agendas in the future to ensure that we continue to work towards those commitments as well, also trying to be as responsible as possible with all of our discussions here today.

Presenter: Public comments make a strong case for Lane County to stay the course and save its TLT monies for a winter
sports arena. Commissioners agreed and went into extra time Tuesday to make the final changes to the county budget.