BISBEE — In general, Cochise County revenues are “much higher than expected, much higher than budgeted, much higher than in previous years,” said budget manager Dan Duchon in a work session Jan. 22 with the Board of Supervisors.
Duchon gave Supervisors Ann English and Tom Crosby the update for the second quarter and said, “This has the potential to be the strongest county sales tax collection we have ever seen.”
Revenue generated by the county’s half–cent sales tax in the 2020-21 fiscal year could top $10 million, far beyond the budgeted amount of $6.4 million, according to Duchon. Already the county has collected $6.6 million and there are five months to go in the fiscal year.
“Our estimate was extremely low,” he added.
In the spring when the budget was being developed, the COVID-19 shutdown was beginning and the budget team decided to use caution in estimating revenues, he said.
State shared sales tax continues to climb, though at the more normal rate of past years. The team estimated collecting $13.1 million. The county has collected just more than $10 million so far, and Duchon expects to surpass the estimate.
Highway User Revenue Funds, from the state gas tax and used only for infrastructure and roads, is running on par with previous years and has not shown the extreme growth of the sales tax revenues. Duchon suggested people were not driving as much due to working at home. It has provided $6.1 million so far this fiscal year.
Vehicle license tax, in part generated from the sale of new vehicles, was up slightly and tracking the same as previous years with $3.8 million collected to date.
“It was stronger than we expected,” said Duchon.
Contracting and prime contracting, which he explained as a state “convoluted taxation process,” are funds generated by construction.
“Different types of contracting activities are defined differently and taxed in different ways. The size and scope of the project may allow the materials to be purchased tax free, but then a portion of the cost of the project itself is taxed, based on the location of the job, not the location where the materials were purchased. This is all handled at the state level,” said Duchon.
That particular tax is prone to ups and downs throughout the year. In October, $450,000 was collected. It plummeted to around $160,000 in December. However, Duchon said the county was collecting 10 times more than in the past. The rise started in November 2019.
“It could be due to the border wall, but I don’t have a solid answer to the rise,” said Duchon.
The collection of online sale tax began in November 2019 and has provided additional revenue each month of $50,000 to $60,000 for the county’s General Fund.
“I’m estimating it will add roughly $600,000 to our county half cent sales tax, annually,” he added.
Property tax is right on track, also. It brings in around $26 million a year.
County Administrator Richard Karwaczka said, “Looking at the graphs, it’s a highly unusual increase in revenue. It’s more of an anomaly. We shouldn’t bank on this happening year after year. The worry and concern I have is when will it drop. We have an influx of money coming from the federal government. Once that money stops, it could change. If things worsen, we should be cautious with our budget going forward.”
English pointed out the time for budget development is nearing. Though it may look like the county is good shape now, it does not mean departments should plan on asking for more money in their budgets.
“From my perspective, it shows we have an anomaly here. Let’s put that money to one side and see if it’s something we can count on or if it really is a one-time thing,” said English. “I’m glad we’re not having to ask departments to cut their budgets. That’s always a concern of mine. The employees should know we’re not asking them to take non–paid vacations. We’re OK at this point but I don’t feel we’ve won the lottery.’
Concern was shared about possible business property tax cuts by the state. English explained the state started out at a 25 percent tax rate, which has declined year to year. Gov. Doug Ducey wants to reduce it further.
However, she thought the annual valuation of property has been rising and that could offset the loss. If not, she said the county would have to raise the tax rate in order to bring in the same amount of money.
She said, “The governor doesn’t want to raise taxes, but says to us ‘you can raise your tax rates.’ So, let’s watch this carefully. That is something that will hit this board at some point in time. If the state reduces commercial property tax, it will affect our budget since property tax is our main source of revenue.”
Crosby said he met with Karwaczka and Duchon to talk about the Public Safety Personnel Retirement System and the huge debt the county owes. He also suggested looking at a broad range of indicators, including inflation.
Crosby said, “Another thing to consider when talking about business property, when looking at a small business owner, you’re taxing that individual twice — once for his business property and once for his home. But, he doesn’t get a double vote even though he may be contributing to our economy in hiring employees and so on.”
English pointed out the rise in property values in the county does not always match other counties in more urban areas.
“If we are not taxing those business properties, the homeowner is going to pay,” she added. “So, let’s watch that carefully and give this information to the state and our legislators when that comes up.”