Sonoma County facing $21 million budget shortfall due to Northern California fires

Early estimates indicate the Sonoma County government will face a $21 million shortfall at the end of the current fiscal year because of the October wildfires.

The anticipated budget gap stems from an expected revenue decline of about $10.7 million from the fires that destroyed thousands of area homes and necessitated an outpouring of public dollars to fund the disaster response.

The estimate includes the loss of property taxes on scorched homes and businesses, and another $10 million spent by the county on staff overtime and supplies needed in the wake of the worst emergency in the county’s history.

Losses should continue at similar levels for several years, peaking in the 2020-2021 fiscal year at an anticipated $24 million, according to the preliminary figures county staff members will present to the Board of Supervisors today.

Supervisor Shirlee Zane, the board chairwoman, said the county made some prudent fiscal decisions in recent years, amassing a healthy reserve and paying down debt, which will help soften the blow. Still, the county will feel a significant financial squeeze.

“We’re in a very strong place right now, but we’ve got to recognize that if you’re looking at a loss for the next five years, you need to make sure that your house is in order in terms of what you can pay for and what you can’t,” she said.

“It’s not going to be easy, but I also feel that we have great partnerships with the state and federal governments. That has been demonstrated on a number of issues in the last eight weeks.”

The city of Santa Rosa, meanwhile, expected to see a revenue drop of at least $11.5 million over the next two years, a blow to a government already facing financial challenges, including a housing crisis and big investments promised for Roseland.

“Disasters don’t come cheap,” said Debbi Lauchner, the city’s chief financial officer.

“It’s never easy when you have a sudden drop in revenues or a sudden increase in expenses.”

The biggest revenue loss is expected from sales taxes, a combined $4.2 million hit the next two years.

She stressed that figure is a crude estimate, representing only the value of the sales taxes generated by 30 or so businesses destroyed in the fire.

It is likely some of those sales will shift to other businesses. Shoppers at Kmart, which burned to the ground, may simply shop instead at Target, leaving sales taxes to the city the same, she said.

There is also reason to think some businesses in the city will see higher total sales from replacement purchases, such as new clothes and cars, Lauchner said. But many people have been displaced to other communities, she said, and many of those purchases might take place elsewhere.

While the numbers provide some of the most detailed indication to date of the fires’ potential impact on public coffers, officials have stressed the full extent of the fires’ financial hit is still uncertain.

Local agencies do not yet know, for example, how much of the cost of debris removal - an estimated $750 million in Sonoma County - they will need to cover.

Depending on how the federal and state governments agree to divide the bill, the county and Santa Rosa could be on the hook for an additional $9.4 million to $23.4 million each, according to the county’s estimates.

Among all county tax-collecting agencies, secured property tax reductions after the fires are estimated at $18.4 million this fiscal year and about $20.7 million next fiscal year, according to current county projections.

Of those amounts, the county general fund and special districts overseen by the county will face reductions of about $3.9 million this year and about $5.4 million next year.

Much of the remaining property tax losses will be felt by local school agencies, who will see a combined reduction of about $10 million this fiscal year and about $9.7 million next year, according to the county’s estimates.

All nine incorporated cities in the county will share some amount of property tax reduction this year because the county already set the tax roll, according to Erick Roeser, the auditor-controller-treasurer tax collector. That means even cities that experienced no fire damage within their boundaries will still face a property tax reduction since state law requires the county to adjust the current tax roll based on a formula.

Next year, however, the property tax reductions will better reflect the areas where damage actually occurred. So Santa Rosa will face an estimated property tax reduction of about $513,000 this year but a $1.7 million reduction next year, according to Roeser’s office.

Roeser said his office was working with state Sen. Mike McGuire, D-Healdsburg, to get the state government to cover local property tax losses.

“If we’re successful in getting that included in the state budget, the hope is to have these taxing agencies held harmless through a backfill from the state of California,” Roeser said. “We’re pretty early on in that process, and we’ll know more in the coming months.”

The county has a variety of other options to explore in order to close its own budget gap, including dipping into its $53 million main reserve and shifting the way departments spend their resources.

“Over a period of time after the recession we have added a program here or there that is nice to have, and it enhances the services, but that perhaps is not required,” said assistant county administrator Christina Rivera.

“If you start finding those kinds of things, then you start limiting how much your baseline expenses grow by if you start taking away some of the discretionary out of the picture.”

County officials are not currently planning for any layoffs as a result of the fire-fueled shortfall, Zane said.

“I’m optimistic; I think the policies are in place,” she said of the financial impact from the fires.

“I think that we’ll be OK, but we also realize that the next few years are going to be tough at the same time.”