The coronavirus pandemic has wreaked havoc on most people’s 401(k) plans and it has also been doing some damage to the 2019-2020 Guilford County budget that was approved last summer.
Local governments like Guilford County budget for the fiscal year based on anticipated revenues – but, last June when the Board of Commissioners approved the budget, no one foresaw a virtual shutdown of the world’s economy.
Guilford County Budget Director Mike Halford said this week that he knows the county is going to take a hit but right now he’s not sure how large that hit will be. The county’s two major sources of revenue are from property taxes and sales taxes and Halford said that the sales tax side of the equation is where the coronavirus will do the most damage. Guilford County projected about $90 million in revenue from sales taxes in fiscal 2019-2020, but now that number is in doubt.
Halford said on Tuesday, March 24 that the State of North Carolina sends the county reports on sales tax revenue several months after the fact, so the issue is hard to quantify at the current time. He said that, with the large drop in economic activity in the county, it’s not clear what those coming sales tax numbers will look like.
The size of the hit also depends on how long economic activity in Guilford County remains at record low levels – and no one knows the answer to that question.
Guilford County Finance Director Harley Will said that Guilford County will also take a financial hit due to an inability to get any significant interest income on its investments. Will said he had worked through some preliminary numbers as to what the new ultra-low interest rate environment would mean for the county’s investment income, but he added that he had not yet shared those numbers with Guilford County Manager Marty Lawing so he didn’t want to release them publicly. Will said the county’s investment options for its savings account is highly limited since there must be an emphasis on absolute safety and liquidity. That means, in the current interest rate environment, Guilford County will earn next to nothing on its savings account going forward.
Fortunately for the county, the vast majority of the county’s property tax revenues have already been collected for the current fiscal year that ends June 30, so the virus shouldn’t affect that revenue stream in a major way, at least not this fiscal year.