County to air cash flow woes

Flagging casino revenue a factor

CHARLES TOWN – Jefferson County commissioners could take action to address cash flow difficulties in the county’s budget after they are presented with a budgetary analysis at their meeting this week.

[cleeng_content id="598735058" description="Read it now!" price="0.49" t="article"]Commission President Dale Manuel said the commission is about $1 million in debt and the panel will have to begin to look at how to address that. The commissioners have already implemented a hiring freeze.

“With our budget, we have some difficulties,” Manuel said. “Our staff is working with it right now and then we are going to have some options we can look at.

“With the hiring freeze in place and looking at our major expenditures, I think we’ll be able to make it through this period of time.”

Commissioner Jane Tabb said much of the county’s cash flow crunch is because of how taxes are collected, with property taxes not due until Sept. 1.

“A lot of folks, when they get their budget allotment, they’ve got contracts they need to pay or there are things they were planning to purchase. They were spending down their budget through June, and now they have a new budget,” she said. “Unless you have a good carryover, you’re going to have a cash flow issue.”

Commissioner Walt Pellish agreed.

“What we’re really faced with right now is a cash flow issue for a couple of months, and we’ll get through that as revenues start to flow in,” he said. “We’re going to be looking to see if there are any anomalies in the numbers, if we’ve overspent somewhere, if there was double spending somewhere.”

County Administrator Debbie Keyser called the current cash flow issue a typical annual event.

“(That’s because) the first of the year starts July 1 and revenue from taxes doesn’t come in until the first of September,” Keyser said. “The bills come in in July and August and we make sure we have enough on hand to make sure we can pay the bills.”

Commissioner Lyn Widmyer said the most troubling revenue figures came from the county’s gambling revenue.

“The numbers that were most grim were about $1.3 million less than we anticipated for table games, video lottery and the 911 fee,” Widmyer said. “It is 20 percent below what we budgeted, but the same is true of (the emergency dispatch fee). More people are switching to cell phones, and so we don’t get as much revenue from the fee.”

But the county is also facing reduced tax revenue from slots and table games at Hollywood Casino, where revenue has been trending downward rather sharply. Manuel said the county has been feeling the drop in gambling tax revenue.

“We had reduced the [projected] revenues 22 percent for (video lotterty machines), and 12 percent for table games, so we had anticipated some drop in revenues from the gambling side of our revenue stream,” he said. “The overall revenues that are coming in now are about 5 percent short [of the revised projections.]”

Widmyer said the commission’s current budget anticipates that gambling revenue will level off, rather than continuing to decline. “We’re still in danger of being too optimistic,” she said.

Timothy Wilmott, president and COO of Penn National Gaming, told stock analysts in a conference call last week that the downward trend has been due to both lack of demand and to new competition – referred to in the industry as “cannibalization” – particularly from the Maryland Live! Facility.

“[O]verall in the second quarter, we did see softness in the consumer and as we look at stable markets that were not impacted by infusion of new supply, clearly, there was softness,” Wilmott said, according to transcripts on seekingalpha.com. “And we’ve always known that this year was going to be a rough year in terms of new competition. I will tell you that we are not – we are well within the range of expectations from the beginning of the year relative to what we would see in cannibalization. And that cannibalization is in a number of locations … It made a lot of impact on Charles Town.”

While the conference call covered sales only through the end of June, Wilmott told analysts that July’s results had been largely similar.

Pellish said flagging gambling revenue is only one factor in the commission’s cash flow issue, arguing that the larger issue is the fact that property tax payments begin to flow until a few weeks from now.

“I don’t think [casino revenue is] a major issue in terms of the cash flow,” he said. “Certainly there is an impact, but the revenues are still flowing in weekly from the casino, so it’s not as if everything has been cut off.”

Manuel said he does not anticipate that there will be a need for any layoffs or furloughs for county employees, a sentiment that was echoed by other commissioners.

“I do not anticipate that at all,” he said. “I want to make that real clear.

“Until we start collecting the property tax money, we run into cash flow problems,” he said. “We’ve already put into effect a hiring freeze, and we’re looking at large expenditures and trying to be conservative there until about October, when we’ll have an infusion of cash from people starting to pay their property taxes.”

Pellish said the commission will have to find ways to both decrease expenditures and increase revenue.

“I think we have to make certain that we get our spending under control,” he said. “We’re doing an analysis right now as to what was spent last year. We’re trying to determine why and also to determine how serious the problem is.

“On a larger scale, I think our biggest problem is that expenses have been pretty well defined over the past few years,” he said. “I don’t think we did anything rash last year, but we have to find a way to generate some more revenue.”

Manuel said he hopes to ameliorate deficits by targeting two areas of expenditure particularly: jail costs and emergency services funding.

“Any decrease we could get in [regional jail costs] would be helpful to our budget problems,” he said, adding that the state is currently reviewing ways to reduce these costs, but that the commission hopes to take proactive steps as well.

“We are also looking at an ambulance fee,” he said. “If we were able to have additional money coming into the ESA. Currently, through the ESA, we finance all the fire departments to the tune of $61,000 a year.”

Manuel said that some short-term cuts may also have to be considered.

“What I would say is that we may have to do a percentage cuts to department heads and a percentage cut to contiguous units,” he said, referring to groups like the Development Authority and the Parks and Recreation Board.

Pellish said that, to improve the longer-term picture, the county should be working to diversify its commercial base to ensure that the county’s finances are not as dependent on gambling taxes.

“[Business growth] to me is the key,” he said. “That is the obvious key. You don’t want to go after existing people for more money via tax increases, and our base is too tight right now.”

“Over the years, we have grown somewhat dependent on the casino,” he added, “but I think if we can bring three, four, five new businesses in we can broaden the tax base and be in good shape. I think the future is very bright, quite frankly.

“We have to keep working very diligently on some prospects we are working with and hope they come to fruition,” Pellish said. “We do have some good things going with the Development Authority. I think we’ve had some good changes take place within the CVB, and, as time goes on, they’re going to pay off.”

Manuel said an increase in construction activity could also go a long way toward shoring up the county’s finances.

“Right now we are in a lull for new construction. It may be that additional construction picks up. That means new money coming into the coffers,” he said.

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