What, Me Worry?

For the last few weeks the most common question I've been asked is, "How will the economic crisis affect the city?"

Short term:

1. Cities issue bonds for everything from new sewer lines to fire trucks. The bond market is frozen right now. Cities are actually very reliable borrowers, so I'm expecting the municipal bond market to be "fixed" before too long, but there will be ripple effects.
   
2. Gas tax: Back in April the state told us to expect 8% less gas tax revenue, which we use to repair roads. It may be even worse.
3. Construction permits: The end of the housing boom means a dramatic drop in revenue from construction permits.
4. SDCs: The drop in residential construction also means a big drop in income to our "system development charges (SDCs)-- funds which are banked to pay for future infrastructure capacity upgrades.
5. TRTs?: Our transient room tax (TRTs) have been strong so far this year, but if consumers truly get spooked and stop driving to Hood River we'll see a drop in one of the major components of our General Fund revenue.

Long term: The city is us, so anything that affects our finances will eventually affect the city. As an example, property tax delinquency rises when foreclosure rates rise.

There is a small piece of good news here: When we started budgeting back in April, we decided to take a conservative view on revenues, so even with revenue declines in some categories we're probably OK in the short term. We also scheduled a mid-year review in November, so we can consider if any mid-course corrections are called for. I don't think there is any doubt that the Budget Committee will be willing to move aggressively if the numbers don't look good.