With many economists still predicting a recession in the near future, the Chehalis City Council passed a pair of ordinances on first reading during its Monday, March 26, meeting, establishing an emergency fund and a sales tax revenue stabilization fund.
As Chehalis sees the majority of the sales tax collected come from the multiple car dealerships, a recession — causing a decrease in auto sales — would hit the city hard.
Chehalis Finance Director Chun Saul explained to the council the funds had been set up in accordance with Washington state law outlining the creation of contingency funds, which can be used in other scenarios aside from an economic crash.
“There are two emergencies under the RCW, one is non-debatable, which is natural disasters and the criterias that define those,” Saul said. “... Other emergencies, which council can declare emergencies if certain events happen. There are different processes for different emergencies.”
Some of the other emergencies listed in the RCW include riots, insurrection, war or an “other unanticipated occurrence requiring immediate preservation of order or public health.”
The emergency fund will be capped at $414,400 and is not to exceed $0.375 per $1,000 of assessed property value within city limits. Chehalis’ total assessed value for all property within city limits in 2023 was $1,105,246,154.
It will be funded by any tax or revenue source not restrictred by state law, along with year-end budget surplus funds if available.
Should it be utilized, the ordinance dictates the emergency fund will be replenished using unanticipated, unrestricted revenues and surplus budget funds.
Saul went on to say the sales tax revenue stabilization fund was critical for the city.
“As you know, sales tax is the largest revenue source in the general fund. It’s more than 50% of the general fund revenue,” said Saul.
The sales tax revenue stabilization fund will start with a total of $406,200 and will be funded with up to 70% of the city’s annual construction sales tax every year, which has averaged $326,700 per year since 2014, according to the council’s agenda report. The amount totaled $406,200 in 2023.
This fund balance is capped at 10% of the average annual total local sales tax in the three years before the current year, which for 2024 totals $621,302. The council can authorize use of the fund when the annual local sales tax revenue growth rate drops below 2%.
Should it be utilized, the ordinance dictates the sales tax revenue stabilization fund will be replenished as soon as possible given existing economic conditions and budgetary constraints with 70% of the annual construction sales tax every year.
For the council to authorize the use of either of these emergency funds, a majority-plus-one vote is needed, according to state law, meaning at least five out of the seven Chehalis city councilors must approve use of the funds.
Both ordinances establishing the new emergency funds were passed unanimously and will receive second readings at the next regular Chehalis City Council meeting on Monday, April 8.
Council meetings are held at Chehalis City Hall, located at 350 N. Market Blvd., and begin at 5 p.m.
