If voters reject the lodging tax in November it will spell the loss of $1 million to $2 million per year for both the town and county, sending officials on a search for ways to adapt to a thinner wallet without neglecting core responsibilities.
Without the 2 percent tax on visitor hotel stays — which primarily funds public transportation, Parks and Recreation and public safety — the town would face a 6.5 percent drop in its general fund, and the county a nearly 5 percent drop. Opponents of the tax criticize the 60 percent portion of it that is mandated to be spent on promotion, not the 40 percent portion spent on visitor impacts, i.e., local government.
As Town Manager Larry Pardee put it, officials can try to continue operating at the current level with fewer employees and resources or seek new sources of revenue.
“It’s disappointing, but that’s OK,” he said. “We’ll do what we always do: adjust to the circumstances.”
As he sees it, that means working with leaders of town departments to spread budget cuts as evenly as possible. The Jackson Police Department and Public Works, as the two largest, would be responsible for giving up the most.
Police Lt. Roger Schultz said the police department has had preliminary conversations about that with Pardee, though it doesn’t know yet how much it would be asked to cut. In past spending reductions, however, he said the department has avoided salaries and benefits, by far the largest portion of its budget at 80 to 85 percent.
That leaves training and equipment on the chopping block, Schultz said, allowing the department to keep staffing steady but making it more difficult to offer the same quality of law enforcement.
“There’s not a whole lot of fluff,” he said.
Pardee said the simplest route is to cut back on expenditures rather than try to find new revenue sources. He’d prefer the latter, but he’s prepared for frugality.
And he sees a silver lining in the difficulty that may lie ahead. He remembered the words of his predecessor, former Town Manager Bob McLaurin: “Never waste a good crisis to innovate.”
With that in mind, he said he would ask everyone to look for creative ways to work more efficiently, reducing expenses while maintaining the highest possible level of service.
By now Pardee considers himself, and several of his department heads, to be “battle-tested.” He’s weathered several shortfalls in town government, most recently as Public Works director during the recession of 2008.
Lessons from the past
When sales tax — the “lion’s share” of the town’s budget — slowed over the recession years, Public Works had to leave open a handful of positions after employees took early retirement.
Pardee said he challenged people in his department at the time not to let this hinder them. But they simply had fewer hands on deck, leading to reduced service.
“It was noticeable,” he said.
During one winter in the recession, Pardee recalled, residents grew frustrated at the slower pace of snow removal. But with his snow team reduced by a third, Pardee said, it struggled to keep up with community expectations.
The county left many positions open as well, said County Clerk Sherry Daigle, who was also clerk at the time. It also froze salaries, cut back on capital expenditures and reduced funding to human services like the Children’s Learning Center and the Jackson Hole Community Counseling Center.
Daigle said she’s less troubled by the possibility of losing the lodging tax than she was by the recession.
Besides the fact that the town and county lived without the lodging tax for many years before 2010, the difference is one of predictability. They know exactly how much they’ll lose if voters decide to repeal the tax. With a broader economic downturn it’s difficult to judge the impact.
From 2009 to 2010, when the recession descended on Jackson in full force, the town lost about $1.5 million in sales tax, more than 9 percent of its budget then. Overall sales tax makes up roughly 70 percent of the town’s budget.
Though the lodging tax’s 6.5 percent of the budget is no trivial amount, Pardee worries more about the idea of it coinciding with another nationwide crisis that could prevent people from visiting Jackson and, in turn, cut into sales tax revenue. Fifteen percent or more would be a serious burden.
Another consideration, Pardee said, is that with Jackson’s recently adopted land development regulations the town is set to absorb some 1,800 units of housing potential from the county.
“Potential” is the key word, meaning that total number of units won’t suddenly sprout up all at once or even in the near future. But it does mean that eventually, the town can expect to serve more residents, even as it loses a major revenue source — essentially trying to do more with less.
“I don’t know that that adage is actually true,” Schultz said. “You can’t really do more with less. You can only do less with less.”
One way or another, Daigle said, the town and county government will have to meet the community’s needs.
“Just because we don’t have the lodging tax,” she said, “doesn’t mean we can quit running the ambulance or emptying the garbage.”
The impact of losing the lodging tax likely wouldn’t hit until next fiscal year, beginning July 1, Daigle said. That would leave the town and county a few months to plan their reaction after finding out election results Nov. 6.
Besides the cost-cutting measures Pardee cited two options for increasing revenue: Implement a seventh penny of sales tax for the first time or assess mills again after a hiatus of several decades (the county already assesses about eight of a possible 12 mills).
The sales tax structure for Teton County is complex, but essentially it consists of five permanent pennies per dollar, with one additional penny. That additional penny is the specific purpose excise tax, or SPET, which voters can impose on themselves to fund defined projects over a certain span of time.
But the state allows for one more penny, a seventh, which can serve as a second SPET penny or go toward the general fund. That would have to be approved by Teton County residents.
As for mills, one mill is equivalent to $1 per every $1,000 of assessed property value. It would take roughly three to four mills to account for lost lodging tax revenue, and the town can legally assess up to eight.
In 2008, Pardee said, the elected officials had little interest in either of these options, so the town focused entirely on curbing expenditures.
He said the council has not yet begun to discuss those possibilities, and he thinks it would most likely ask him to first do all he could to reduce spending rather than jump to new revenue sources. After seeing where that leads, the council could decide on some combination of the two approaches.
“It’s like anything,” Pardee said. “You go after your low-hanging fruit, the easiest areas to adjust to.
“Then you start looking at the harder decisions, and I assume this would be no different.”
Daigle, like Pardee, sees the tax as valuable funding for local government. But she’s optimistic that officials could find ways to rein in spending.
“We had many years with the lodging tax; we had many years without the lodging tax,” she said. “I’m sure we’ll survive.”
Pardee’s attitude mirrored Daigle’s, at least for now, four weeks before the election.
“I’m calm about it,” he said. “Come see me after it fails, though.”