Had the council not postponed its March 7 meeting until March 14, the council would have been taking up a discussion on revenue measures this week. On several previous occasions, the council has discussed but failed to come to agreement on the appropriate revenue measure.
That means that, while the council put the successful half-cent sales tax on the ballot for June 2014, they did not put a parcel tax or other general revenue tax on the ballot in November 2014 or June 2016.
Dan Carson, a member of the Finance and Budget Commission, laid out an analytical framework to approach the next tax measure.
One point offered by that commission is the need for “an analytical assessment of the city’s overall General Fund condition” as the “the primary factor used to determine the size of a new tax proposal.”
In his piece he notes, “Both a commission subcommittee and a consultant retained by city staff are currently developing long-term revenue and expenditure projections intended to recognize now-unfunded liabilities for employee compensation and infrastructure costs and to identify the funding gap that remains.”
He makes four other critical points, noting the need for a well-crafted package “to more fully meet the city’s critical infrastructure needs.” He said that there needs to be “reasonable assurances to voters that the new revenues would be spent as proposed.”
He also references the need for a “fairer taxation” and finally the need for the tax measure to grow in order to keep up with inflation.
Of these, I am most concerned with the notion that the voters have some assurance that the revenues will be spent as proposed.
There is a good deal of history here. In 2004, the council passed a half-cent sales tax that was supposed to keep parks open and prevent the city from having to lay off city employees. Somehow, though, the council turned around in 2005 and gave away the store. The firefighters got a 36 percent salary increase and other bargaining units got 15 to 18 percent.
But of course that was a different era, but in December 2015, the council voted to provide four bargaining units with a 3 percent COLA (Cost-of-Living Adjustment) without even pulling the item from the consent calendar. This coming about 18 months after the voters had approved a tax increase to close the general fund’s structural deficit.
The city has limitations on what they can do with a general use tax. The city cannot bind itself to spend the money a certain way, because that would require that the vote be two-thirds.
The council, in 2014, opted not to bind itself to any sort of spending commitment. At the time, it said it would put a parcel tax on the ballot to cover infrastructure needs – something that never materialized.
So the issue of spending the tax money as promised is not a small and immaterial issue.
A second issue – one that Mr. Carson does not raise in his piece – I think is just as important.
Our analysis of the budget and what we have seen from the model developed by the Project Toto team suggests we need a three-pronged approach to closing what is a much larger budget hole than it appears on paper.
Basically, we need first a cost-containment strategy, second an economic development component, and third a revenue measure.
Some will argue that, if we are going to ask the voters to pony up more money, we need to have an economic development strategy in place. Toward this end the city council has already approved three additional hotels for the city.
But two of those are on hold due to litigation and one settled but at a sizable reduction in the size of a hotel conference center. I find comments by attorney Patrick Soluri (representing Holiday Inn Express & Suites owner Roshan Patel in opposition to the proposed Hyatt House hotel) troubling, suggesting that the council has abandoned sound land-use policy in order to chase tax revenue.
The city also continues to look toward an innovation center that might bring substantial additional revenue.
But the biggest thing that the council needs to do is cost containment.
Critics can point to cities with far more in the way of per capita retail sales and revenue who are still struggling fiscally because they have not contained their costs. Without a firm commitment to cost containment any revenue measure and any economic development revenue increase will be eaten away by cost increases for employee compensation.
A year ago in February 2016, Robb Davis put forward a seven point plan for cost containment.
But, even if we hold the line of new spending, we face challenges. In December 2016, Mayor Robb Davis told the Vanguard: “The most updated analysis by the City-contracted actuary indicates that even if employee salaries do not grow at all over the next five years, our required pension contributions across all employee groups (police, fire and miscellaneous) will grow by over $4.8 million per year compared to today.”
He added that “while it is true that we are ‘keeping up’ as things stand currently, the cost of ‘keeping up’ continues to grow and that crowds out funding for other projects our community needs to maintain the level of service citizens expect.
“Something must give,” he said. “Thus, I am less sanguine than our City staff. In fact, it is not clear to me at this point how we are going to cover everything over the next five years, given that we are not even covering critical infrastructure backlogs now.”
Simply raising tax revenue is not enough. That revenue will easily be crowded out by increased costs to provide current levels of service and current levels of compensation.
That task becomes more difficult when the council agrees to COLAs and other pay increases.
That is going to be the big challenge. The Vanguard fully supports a new revenue measure, but there must be with it a commitment to contain costs, otherwise the new revenue won’t be going to pay down the $655 million gap, it will go to keeping up with current costs and commitments.
—David M. Greenwald reporting