Facing $8 million deficit, Escondido again weighs sales tax hike

Deep cuts in services such as police and fire protection, removal of graffiti and library hours face Escondido below a projected budget deficit of $ 8 million in the next fiscal year if the city does not find a new source of revenue, according to a presentation to the City Council at last week’s meeting.

The discussion came after the city considers imposing a half-cent and full sales tax increase on the November ballot. Following the presentation, the council instructed staff to survey the townspeople if they would support such a measure.

“This would be the next logical step in this conversation,” city manager Sean McGlynn told the council.

It would take four council votes, or a super-majority, to impose a sales tax increase on voters in November and then a simple majority in the ballot box to approve the measure. The deadline to place the question on the fall ballot is August 12th. A similar move failed to garner four council votes in 2020, with council member Mike Morasco in opposition.

Over the past few months, a subcommittee of the council of mayors Paul McNamara and Morasco has been investigating issues related to a possible sales tax measure. They presented their findings to the full council last week.

City staff presented the council with four different revenue scenarios and described the potential impacts of each scenario on the city budget. The scenarios included a lack of new revenue and a possible increase in sales taxes of half a cent, three-quarters of a cent and one cent. Possible tax rate increases were labeled, in ascending order, “surviving”, “stabilizing” and “flourishing”.

“Operating revenue has not kept pace with rising utility costs,” Christina Holmes, the city’s finance director, told the council. In compiling the presentation, she said each city department was asked to provide cuts it would have to make if new revenue is not made available.

Among the possible cuts listed in the report were 10 police officers (out of the current 160 total), 12 firefighters, three emergency medical technicians and the closure of a fire station (the department currently has 93 firefighters / medics).

Other possible cuts included reducing library hours, reducing park maintenance, possibly closing city pools, reducing or eliminating the city graffiti removal program, and reducing the staff needed to work out development plans. and home remodeling.

On the other hand, with a full increase in the sales tax by one cent, the police department could add 25 to 35 new officers, bringing it to the average per capita range for police personnel in San Diego County, it said. in the report. The fire department can increase its staff by 12 firefighters and 12 emergency medical technicians according to the one cent scenario.

According to the report, a one-cent increase in sales tax – to 8.75 percent from the current 7.75 percent – would increase $ 28.3 million a year, while a half-cent increase would increase $ 14.1 million a year.

Without new revenue, Holmes said, the city’s budget deficit is projected to increase from $ 8 million in the fiscal year starting July 1 to $ 23 million by 2036.

Among the costs that drive the city’s future projected budget deficits, Holmes said, is an annual payment for the city’s unfunded pension obligation, required by the state pension system for public employees.

These payments will range between $ 15 million and $ 22 million a year over the next few years, and payments will continue through 2044, Holmes said. These costs remain despite the city’s efforts to curb pension costs by reducing benefits for employees employed after 2012 and increasing the share of pension costs borne by employees.

Council members provided a range of suggestions to city staff as the city continues to explore a possible sales tax measure.

Council member Tina Inscoe said such a move should include a termination clause, in which the tax increase would end after a certain period.

Council member Joe Garcia said potential revenue increases should be accompanied by cost-saving measures to help close the budget gap.

“If we do not do this, we can easily end up with taxes and expenses, taxes and expenses, taxes and expenses, instead of being efficient and instead of making some cost cuts,” he said.

Morasco said it was important that the facts of the city’s financial situation be made clear to the public and the Escondido business community. For example, he said, with a significant portion of the budget gap due to pension liabilities, the city could look at issuing pension liabilities to repay a portion of the pension debt.

“Pension bonds, like many other cities in the area have done, can bring out 50 percent of these dollars that were talked about in the equation deficit, which significantly changes what we are seeing here,” Morasco said.

Under question from Morasco, Holmes acknowledged that some of the cuts envisaged could change as final spending priorities are set during budget discussions. He said this should be made clear to the public as well.

Council member Consuelo Martinez said it was important to note that only voters, not the council, have the power to raise taxes. She said the city already operates on a very poor budget and “I do not see where we can fill these deficits, so I understand why we are exploring this.”

Mayor McNamara said his mother told him there was no free lunch. “Life costs money,” he said. If voters decide against raising the sales tax rate, he said, “It risks graffiti starting to rise, the city starting in a downward spiral, investment starting to fall and people starting to leave. “I do not think we want that.”

Facing $8 million deficit, Escondido again weighs sales tax hike Source link Facing $8 million deficit, Escondido again weighs sales tax hike

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