On February 18, Financing City Services Task Force Chair Bruce Banco presented to the Pacifica Democrats club the history, goals, and objectives of the task force, and its recommendations for the City Council this year.
City and County Median Income Statistics
"Pacifica is the sixth-largest city in San Mateo County. San Mateo County has a median household income of $95,300. Pacifica has a median household income of $91,134, yet has the lowest per capita revenue ($600) in the entire county," said Banco. "As you look across the county, we are not anywhere near the top level of pay given to our city employees. In fact, wages paid to our city employees are in the bottom quartile in the state."
Banco said the city has approximately 15 funds, with the General Fund being the biggest at $27 million. He also revealed that ant city's reserve requirements should be generally 10 percent to 20 percent, but regrettably this is not the case in Pacifica. He enumerated the quickly declining reserves from $6,609,009 in FY09/10 to $4,592,054 in FY10/11; $1,523,910 in FY11/12 to a predicted $503,496 in FY12/13; $139,810 in FY13/14, $130,062 in FY14/15, and $66,946 in FY15/16, with a "bottoming out" of zero reserves in FY16/17.
Because of this, the current Financing City Services Task Force has been charged with developing a new five-year financial plan, discussing a reserve policy, and/or setting a reserve amount based on a percentage of total expenditures, in addition to prioritizing options for presentation to City Council for actions to take.
"The task force is presently looking at cuts, concessions, and revenue measures, which entail looking at outsourcing, discussing public input developed from public forums, and overall generally being more fiscally conservative," Banco explained. "Their job is to examine choices, risks, and trade-offs. In order to help with their objectives, they need to look at long-term revenues and economic development, in addition to planning for the passage or failure of planned tax measures."
City's Shrinking Work Force
"Our work force has gone from 230 funded positions in FY02/03 to now approximately 158 full-time employees (176 with part-time equivalents)," said Banco. "We have nine labor unions, and all but two of our employees (Steve Rhodes and Ann Ritzma) are in a labor union. Our total compensation has been down 4.4 percent between 2010 and 2011. Our total compensation (top step) is below county averages in six of seven categories and our police contracts are soon to be reopened for negotiations. With nine unions, the negotiation processes are always ongoing."
Task Force History, Goals, and Objectives
"We have been around for four years. The initial task force was formed in July of 2008 for the purpose of identifying funding to replace the fire assessment, which was due to expire in 2009. In January of 2009, we recommended a one cent per dollar sales tax to be voted on by the voters. That particular measure was defeated by 61.68 percent of the voters. We went then back to the drawing board. In July of 2009, the city directed the (task force) to develop a five-year financial lan that would bring financial stability to the city. In 2009, we were re-chartered, not to just look at something that was already going away, but to really look at the financial structural liability of the City of Pacifica," Banco said.
He noted that the task force in 2010 recommended a five-year plan that included new revenues that would require both voter approval and union negotiations on reductions in employee costs. In March 2010, the task force issued a report that outlined cuts including reviewing the city budget and discussing sources of revenue, and in some cases, restrictions on expenditures. The task force reviewed each departmental budget. The report identified the task force's top priorities: maintaining city services and minimizing layoffs as much as possible. The report recommended that all segments of the community should come together to share solutions. The plan recommended $8.5 million in savings by lowering employee costs through negotiated adjustments to salaries, benefits, pension expenses, and other associated employee costs.
Coupled with the $8.5 million that was to come from these sources, the task force recommended three different tax measures, or at least was thinking of three different tax measures to go along with that. One was the increase in Hotel Transient Occupancy Tax (TOT) to go from 10 percent to 12 percent. The second was a Public Safety Assessment, later changed to Fire Suppression Assessment. The third was a revised Utility Users Tax. Those were supposed to bring in approximately $6 million. The TOT tax passed. That was $160,000.
Back to the Drawing Board
But in April 2011 the Fire Suppression Assessment was abandoned after responses received by the city were sufficient to defeat it. This forced the task force to once again go back to the drawing board, because the Fire Suppression Assessment was a large component of what the city needed. Thus, in June 2011 the City Council adopted a budget with new cuts of approximately $1.5 million, which included the city attorney, a police captain, police dispatchers, and several other positions that added up to 19.7 equivalent positions identified as no longer part of the budget. But that ended up as not being enough, and the task force was charged one more time in 2011 to go through and take a thorough look at the whole process again.
"Our goal continues to be developing a five-year financial plan, and now to really start discussing a reserve policy, or setting a reserve amount to address this," Banco said, adding that this will take some time, since the task force already is having trouble even balancing the current budget, let alone setting reserve policies for the future. But it has been kicking around the 10 percent to 20 percent figure in its preliminary discussions.
"Our goal is about $700,000 a year in either revenue increases or expenditure reductions. We've had 14 meetings since last August. We did a lot of things. We talked about every city departmemt. We talked about every revenue source. And we received a lot of input from people that eventually (was) put into what we call options A, B, and C," Banco said. "These options will be the recommendations that we make to City Council about how to address this problem."
Banco said that all along the way the task force has been making recommendations for consideration to the City Council, as well as to staff, about such items as compensation levels in the city, not only salaries, but other items that ought to be considered, when the city does labor negotiations, such as "cafeteria cash," in addition to a whole laundry list of other items for council to consider, to help it reach goals it has for expense reduction.
"Our current goal is $3.7 million over the next five years that we're trying to identify, in order to get our reserves back up to between four and five million dollars, where they should be...while still balancing the current budget," Banco said.
Task Force Public Forums
"In January of this year, we deliberately structured our public forum the way we did because in the traditional task force meetings, people can speak but are constrained by the Brown Act from interacting with the task force members. We wanted to produce a forum in which people were free to talk at length about their opinions on everything going on concerning the city's budget and have a dialogue back and forth with the task force members. There were several lively discussions at the various tables throughout the room, especially about outsourcing the police department, PB&R cuts, revenues, utility user taxes, parcel taxes, and other issues," Banco said.
In addition to the public forums, the task force devised a survey that could be filled out at the forums, or online, or at home and later mailed in. Task force members wanted feedback. They fully recognized that it was not a scientific sample. But it gave them a sense of what's going on when they received 60 percent to 70 percent "yes" or "no" on a particular issue. They took the survey results and crafted their A, B, and C options for the council's consideration. All of these options take into consideration that the task force already has identified $3.7 million in salary freezes and employee compensation changes, etc., over the next five years, but there still have to be more negotiations to achieve that number, and the city plans to go back to the unions to renegotiate these items.
Task Force Recommendations
Option A: This was the most favorably looked at by the people and with the broadest support; roughly 60 percent were either strongly in favor or somewhat in favor of this option. This is the task force preference in order of recommendation. The option is to put a half-cent transaction sales tax on the ballot. It did not indicate which month. The task force would have preferred it sooner rather than later (in other words, the June ballot, as it may or may not be considered for the November ballot, but that would have to be decided later).
In addition to that, it also has included in Option A an increase in revenues by business license increases, establishing TOT for vacation rentals, increasing the fireworks tax, updating building permit fees, assessing winterization inspection fees, and increasing towing fees.
This would be combined with a reduction in expenditures by implementation of a salary freeze and other employee compensation changes and elimination of two supervisory positions from the Public Works Department, which two positions already have been accomplished by attrition from two retirements. That brings the total to approximately $1.3 million in expense reductions and revenue increases.
Over five years, this would get the city's reserve up to more than 23 percent, and meet the city's obligations on a yearly basis. It grows the reserve to $6.4 million in five years, which would give the city a measure of security for city government to meet an emergency.
Option B: Additional reduction in city expenditures by exploring the potential of contracting out Police Department services to the San Mateo County Sheriff. The task force estimated that it would save $1.5 million. Coupled with other items already mentioned as revenue sources, Option B would bring the total to approximately $1.8 million in expense reductions and revenue increases.
If this option happens, over the course of five years it will grow the reserves to $8.7 million, or 30 percent, which would allow the city to be able to do things again, according to Banco. Right now Pacifica is in "maintenance mode"—just able to pay the bills being its number one priority.
Option C: The same salary freeze and other employee compensation changes as in the first two options and the same elimination of the two supervisory positions in the Public Works Department, but this option would include eliminating funding for the Pacifica Resource Center, the Visitors Center, and Pacifica Community TV. It would reduce staff for the swim team, reduce funding for library hours, and reduce staffing in the Police Department by eliminating one sergeant and one patrol officer.
In addition to the adorementioned revenue generation increase in fees in the first two options, option C would increase teen program fees, recreational swim fees, and swim team fees.
This would total approximately $788,018 in expense reductions and revenue increases. Over the course of five years, the reserve would be at only $3.8 million, the smallest amount of all three options.
Future Public Forums
After it presents these options to City Council, the task force plans to put on more public forums, but future forums will be more traditional, with dais and speaker time limited to three minutes at the microphone, with much less interaction than at the January forum.
How to Implement a Half-Cent Sales Tax
After Banco's presentation, there was a brief Q&A period. The first question was about the process needed for the council to get a half-cent sales tax measure on the ballot. Banco said that the council needs to declare a fiscal emergency, call for the measure to be placed on the ballot, and adopt an implementing ordinance. Declaration of a fiscal emergency requires a unanimous vote of the governing body. Adoption of the resolution calling the election requires a majority vote, and adopting the ordinance requires a two-thirds vote of the governing body and majority approval by the voters at an election.
To questions about what the survey results indicated, Banco replied that 57.4 percent opposed or somewhat opposed outsourcing the police, while 38.3 percent supported or somewhat supported the idea. As to the half-cent sales tax, Banco reported that 60.1 percent supported or somewhat supported the option, and 35 percent were opposed.
But Banco reminded the audience that it is one thing to get a survey result and another thing to get an election vote. He referred to the positive results that the task force had received concerning the previous 1 percent sales tax measure that it had put on the ballot, only to be defeated by 60.68 percent at the polls.
"Something has to happen. It might not be pleasurable. If it's not a revenue increase, it could be tax increases or further salary reductions or whatever it eventually winds up to be, we are just going to have to do it," said Banco.
(Story reported by Barbara Arietta, President, Pacifica Democrats, 415-246-0775; copyedited by John Maybury, Editor and Publisher, Pacifica Riptide)