Expense-revenue gap poses concern
PALMDALE — Faced with a future in which expenses are increasing faster than city revenues, city officials are exploring a variety of means to address this gap.
This includes looking at increasing revenues through steps such as a comprehensive fee study to ensure the city is recouping the costs of service where it can, evaluating assessment districts and exploring means of monetizing the city’s fiber and streetlight infrastructure.
It also includes looking at the viability of asking voters to approve new taxes.
However, for two City Council members, even the suggestion the city is contemplating asking voters to approve a tax measure is unacceptable.
Mayor Pro Tem Austin Bishop and Councilmember Richard Loa opposed a move Tuesday to reduce polling of residents regarding potential tax measures from two to one, polling the Council had unanimously approved in June as part of the 2019-2020 budget.
Neither Bishop nor Loa wanted any kind of polling regarding potential taxes under consideration.
“I can’t stand behind or support additional sales tax in our city,” Bishop said. “I supported trying to find additional revenue sources for our city, but I can’t get behind the idea of an additional sales tax.”
As reported during budget discussions in June, the city’s
General Fund — which covers the majority of its operations — has revenues growing at a rate of about 3% annually, while expenses are increasing at about 4.5%.
More than half the anticipated expense increases are beyond control of city staff, including the city’s law enforcement contract and state employee pension formula changes. This makes it difficult to balance budgets with spending cuts alone.
In approving the 2019-2020 budget, the Council unanimously adopted a framework for seeking various means of increasing revenues to be considered by the Council during the coming year. This included funds for polling on both a potential parcel tax to fund expanded library and museum operations and a potential transactions and use tax, a type of sales tax, for general services.
On Tuesday, city staff asked the Council to alter the plan, dropping the potential parcel tax from consideration and proceeding with polling for the sales tax
only, with an eye toward a potential spot on the November 2020 ballot.
The Council voted 3-2 to direct staff to proceed with polling on the sales tax only.
The city has already been working with a consultant, FM3 Research, on the matter.
A sales tax of 0.75% would generate an estimated $16 million annually, while a 0.5% tax would yield an estimated $10.9 million per year, Director of Administrative Services Anne Ambrose said.
These revenues would be under city control, and would be used to cover general city services, including law enforcement, a cost that has been increasing $1.2 million annually.
The polling is intended to determine the community’s priorities and gauge support for a potential tax measure, to provide information for the City Council to determine how to proceed, Ambrose said.
“I like the idea of us being able to tax it and keep it local instead of the county initiating the sales tax and taking the money again,” Councilmember Laura Bettencourt said.
Bishop said he felt it would deter shopping in Palmdale and hurt local businesses.
That fear has not be borne out where other cities have done it, Mayor Steve Hofbauer said.
Additionally, the transaction and use tax under consideration would apply to online and big-ticket items, such as cars, bought elsewhere, City Attorney Matthew Ditzhazy said.
Hofbauer stressed that the item under question was not approving a tax, but polling the community about a potential voter-approved tax. Should the results come back showing public sentiment overwhelmingly opposed, the Council would likely drop the matter, he said.
“I’m not saying I want to raise taxes. I’m saying I want to hear from the public about what they want to do here,” he said.
However, Loa opposed the polling, as it sends a message to residents that the Council desires a sales tax.
“I don’t want to go in that direction. I think we do need to find other sources of revenues to match these shorts that are apparently coming our way,” he said.
“I look at it as a way of giving the public a voice,” Bettencourt said. “I think this needs to go out to the public. I think we need to know what they think and how they feel.”
Hofbauer questioned Loa and Bishop how they would propose closing the looming budget gap without considering a tax measure.
“We need to move forward with other ways that are not going to tax our community any further,” Loa said. “Our city needs to find other means to raise revenue.”
“I think we need to find more creative and different ways” of budgeting, Bishop said, suggesting a consultant could help in that area.
He also said they need to fight for more revenues coming back from Los Angeles County.
“This city should be flush with funds, but there’s been 10 to 20 years of mistakes that got us to this point,” Bishop said.
City Manager Jim Purtee listed some of the many ways the city staff has already found to balance the budget over the past four years, but still face looming gaps in the near future.
These include refinancing the city’s debt, negotiating a larger franchise fee from Waste Management, steps to increase revenues by $60 million over the next 20 years and using five-year projections in budgeting to be able to forecast needs.
After cutting staff in half during the recession, it has only grown by 12% in the past four years, while offering more in services and events, he said.
“This staff has been incredibly creative in addressing a lot of the issues,” Purtee said. “Staff is doing a monumental job with the amount of taxpayer dollars that are coming into the city, versus the amount of benefit that the city’s getting for what you would see in any other city our size.”