COUNTY CONNECTIONS: COVID-19 and the 2021 County BudgetJan 22, 2021 08:27AM ● By Editor
By Cook County Auditor-Treasurer Braidy Powers from Cook County MN - January 22, 2021
The county’s 2021 budget process essentially began in March 2020 when the county board declared a public emergency due to the COVID-19 pandemic.
FEMA funding for some of our emergency response actions started almost immediately. The board closed public access to county buildings and departments prepared for staff to work from home. Discussions began to determine how the county could cut costs and continue services for the remainder of 2020 and into 2021.
From that point on COVID was in the forefront of budget discussions. The building committee met in early April to determine what projects needed to go forward in 2020 and what could be put off until 2021 or later. The board considered how they might soften the blow to taxpayers and took action on April 28 to delay penalties on property taxes until after July 15. The budget advisory committee began talking about the effects of businesses closures, limited business operations and potential business survival; the ability of businesses and employees to pay property taxes; and the potential for county employee furloughs into 2021.
The first half property tax collections were a positive indicator, as collections were just a few percentage points behind normal. In late May, the federal and state response to the crisis became clearer, and we knew there would be aid for businesses and individuals and for counties to provide additional help. In June, the message of the annual budget letter to department heads focused on how to reduce costs and maintain services with no levy increase for 2021 as a possibility.
A direct effect of COVID on county finances was the reduction of 2020 travel expenses, with meetings being held by conference call or various video conferencing tools. The trend toward virtual meetings, which had been moving slowly for years, took a giant leap, pushed by COVID and improvements in technology. All departments made significant cuts to their 2021 travel budgets, and that trend will likely continue in future budgets.
The other change that may continue is for some employees to work from home. The governor’s directive to work from home when possible spurred the move, with the initial cost of setting up workstations at home paid for with federal CARES Act funding. The positive experience of work from home may continue the trend beyond 2021, which could help alleviate space needs and affect long term capital plans.
In early August, department budgets were assembled, and the board began the review and consideration of a proposed budget and levy. Besides COVID-19, the board had to weigh the possibility of a large loss of annual federal funding. The county had been receiving nearly $2 million per year from the Thye-Blatnik Boundary Water lands for the past 10 years. A federally required appraisal in 2019 reduced the payment to Cook County by $752,000 per year. The three affected Boundary Waters counties registered an appeal due to the appraisal methods, and the Forest Service agreed to conduct a reappraisal. The reappraisal, not expected to be completed until the end of 2021, left the board to wrestle with a potential 752,000 gap in the 2021 budget. The other major consideration was negotiations with three unions for contracts that would end December 31, 2020.
In early September, the assessor completed the early assessment valuation reporting. The result was a significant increase in county market values, primarily due to new construction and a shift in the classification of vacation rental properties. The effect of the valuation increase would be to soften the burden on taxpayers not affected by classification shifts or value increases. On September 22, the county board approved a maximum levy increase of 4.16 percent.
Throughout the summer and fall, tourism activity was much higher than expected, as visitors heeded public health advice for outside recreation. The county’s one percent local sales tax and lodging tax collections rebounded significantly from dismal numbers in the spring and early summer. There was more positive news in late October, when second half property tax payments came in at just below 2019 collection rates, reflecting the tourism activity. The budget advisory committee and county board were heartened by those results, but caution prevailed: federal aid, including extended unemployment insurance, would end soon and payback on federal small business loans would begin in early 2021.
Due to COVID-19, the county’s truth-in-taxation meeting was held via Zoom teleconferencing and telephone on December 1 and 8. A brief presentation included a 30-year history of the county levy showing wide variations that averaged 4.39 percent per year over that period. The meeting was then opened to public comments and questions, with written comments being read aloud. The major concern expressed during the meeting was the effect of changes in classification for lodging properties leading to large tax increases. These comments were referred to the county assessor and to the equalization meetings held in the spring.
Then, on December 22, the county board considered a final budget and levy. The Human Services board amended the PHHS budget request, asking approval to continue the testing and contact tracing program into 2021 to slow the spread of COVID-19. With no additional federal aid from Congress on the horizon, the Human Services board proposed using the PHHS departments fund balance to offset the cost. The highway department request also included the use of $227,000 of fund balance to offset the cost of equipment replacement. The board reviewed the historical average, discussed the known risks and the unknowns still ahead, and approved a levy increase of 3.95 percent, a slight reduction from the proposed levy.
Additional budget and levy information is available at: https://co.cook.mn.us/index.php/county-budget.
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