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Will the Santa Cruz City Council Turn to the Voters for More Tax Revenue As I noted in our last eNews article, after the Memorial Day Holiday we would turn our attention to local finances in the City of Santa Cruz. Last week, the Santa Cruz City Council received presentations from every city department — Economic Development, Planning and Community Development, City Manager & City Attorney, Police, Fire, Finance, Public Works and Parks & Recreation on prospective budget cuts and other reductions each department had in mind. The hits keep on coming and it appears that there is a long road ahead for the City of Santa Cruz as the city manager, the finance director, and department leaders crunch the budget numbers to finalize a 2021-2022 City Budget. The Council is set to return for their June 8 meeting to finalize the budget. The 2021-2022 Budget document can be reviewed here: 2021-22 Santa Cruz City Budget. This will be City Manager Martin Bernal’s last budget as he is set to retire later this summer. In his 11th budget letter to the City Council, he struck a tone of urgency while also complimenting city staff for doing the impossible as we faced wildfires, a pandemic, and endless legal challenges to address our growing homeless problems. Bernal stated, “The fiscal impact of the COVID-19 pandemic is the most significant in the modern history of the City of Santa Cruz, even greater than the Great Recession of 2007. We have never faced such a dramatic 33% over the two-year period, and our Admission Tax revenue plunged an incredible 97%. The City was forced to immediately rely on reserves to maintain solvency.” There is a silver lining in all this number crunching. After more than a year of unpredictable finances for the city and the community during the pandemic, we seem to be on a recovery trend. The City Budget discussion was not only highlighting the negative impact of the loss of major taxes and other revenue streams necessary to run the City. Now comes additional federal stimulus funds. The City also received Federal relief funding. The first round of stimulus funding was allocated in December 2020. The approximately $784,000 was used to address the added costs of responding to the pandemic. It was a wholly inadequate amount for a City like Santa Cruz to respond to the impact of the pandemic. The City is set to receive approximately $14 million in one-time Federal American Rescue Plan stimulus funds to help stabilize the budget. Being one-time funding, it will provide interim stability to the City, allowing the deferral of additional reductions; replenishing reserves; and, essentially, allowing the City the time to develop and implement a longer-range fiscal sustainability plan. But the federal dollars will not close the city’s structural deficit and the City Council must address either further liabilities and reductions or create a new revenue stream. Here is the City’s draft budget breakdown from Santa Cruz Local (Storyline #5). • Parks & Recreation ($617,000 cut): Reduced budgets for San Lorenzo River levee maintenance, homeless camp cleanup, and tree work in wildlands. The City staff plan to search for grants to support camp cleanups. Annual events such as Woodies on the Wharf and the Japanese Cultural Fair would not receive financial support from the city. Temporary staff for the Civic Auditorium would be reduced. City staff plan to focus money and staff on high-demand areas that generate revenue, such as sports programs and childcare, according to Parks & Recreation Director Tony Elliot. • Public Works ($348,000 cut): About $107,000 of savings is due to a grant for the city’s “Local Roadway Safety Plan.” Cuts include $63,700 to street materials and services. “A lot of this street work has been shifted to homeless cleanups and so some of this material (budget) has not been spent, so we think we’ll be fine this year by reducing it,” said Public Works Director Mark Dettle. • Economic Development ($181,000 cut): Cuts include reduced temporary staff, training, trolley operations, and property management. The General Fund capital improvement program, which funds major public facility construction projects, would remain mostly unfunded. Street resurfacing projects would not be funded next year, except for the Measure D allocated funds. The City’s unfunded capital improvement projects total more than $307 million. Unfunded transportation projects account for about $242 million. City Manager Bernal concluded his letter by noting, “Our focus during the 2022 budget year will be on not only recovery but also ongoing resilience. Because of the scale of the structural deficit, the City will continue to identify areas for expenditure reductions and explore the potential for a new revenue measure. Robust new revenue sources are needed to maintain existing essential services and address increased needs for business recovery, health and public safety, and infrastructure maintenance.” In the days ahead, internal city and external community conversations will be on where will those ‘new’ dollars come from? Historically speaking, over the last two decades, the City Council has turned to the voters to seek new revenue for a variety of special projects, programs or to fund specific needs of the City. Here is a list of those Ballot measures approved by City voters since 2004.: • June 2018 — Measure S. Increased the local Sales Tax from 9.00% to 9.25, the maximum allowed by the state • November 2016 — Measure D County Transportation Tax. Impose a half-cent sales tax for 30 years for safety, pothole repair, traffic relief, and transit improvemen • November 2016 — Measure L Cannabis Business Tax. Impose a tax of no more than 10% on gross receipts of cannabis (marijuana) businesses in the city • June 2016 — Measure S Community Facilities District Library Bond. Authorize parcel tax on real property and authorize bonds to be issued by the Santa Cruz Libraries Facilities Financing Authority • November 2012 — Measure Q Increased the Transient Occupancy Tax from 10.0% to 11.0%, effective in July, 2013 • November 2010 — Measure H Increased the Utility Users Tax from 7.0% to 8.5%, effective in spring, 2011 • November 2008 — Measure E Clean River, Beaches and Ocean special parcel tax. Imposed a parcel tax to be used to protect public health and wildlife habitat in the river, bay, and ocean • November 2006 — Measure H Increased the local transactions and use tax from the 0.25% authorized by Measure F in March, 2004, to 0.5%, and removed the sunset clause • August 2005 — Measure X Water, Sewer, and Refuse franchise taxes imposed to replace comparable franchise fees that had been discontinued because they were determined to be taxes rather than fees • March 2004 — Measure F increased local transactions and use tax by 0.25%, with a sunset clause to end the additional tax after five years Will the City Council move to place another revenue measure on the ballot this year or in 2022? Stay tuned.
Will the Santa Cruz City Council Turn to the Voters for More Tax Revenue
As I noted in our last eNews article, after the Memorial Day Holiday we would turn our attention to local finances in the City of Santa Cruz. Last week, the Santa Cruz City Council received presentations from every city department — Economic Development, Planning and Community Development, City Manager & City Attorney, Police, Fire, Finance, Public Works and Parks & Recreation on prospective budget cuts and other reductions each department had in mind. The hits keep on coming and it appears that there is a long road ahead for the City of Santa Cruz as the city manager, the finance director, and department leaders crunch the budget numbers to finalize a 2021-2022 City Budget. The Council is set to return for their June 8 meeting to finalize the budget. The 2021-2022 Budget document can be reviewed here: 2021-22 Santa Cruz City Budget. This will be City Manager Martin Bernal’s last budget as he is set to retire later this summer. In his 11th budget letter to the City Council, he struck a tone of urgency while also complimenting city staff for doing the impossible as we faced wildfires, a pandemic, and endless legal challenges to address our growing homeless problems. Bernal stated, “The fiscal impact of the COVID-19 pandemic is the most significant in the modern history of the City of Santa Cruz, even greater than the Great Recession of 2007. We have never faced such a dramatic 33% over the two-year period, and our Admission Tax revenue plunged an incredible 97%. The City was forced to immediately rely on reserves to maintain solvency.” There is a silver lining in all this number crunching. After more than a year of unpredictable finances for the city and the community during the pandemic, we seem to be on a recovery trend. The City Budget discussion was not only highlighting the negative impact of the loss of major taxes and other revenue streams necessary to run the City. Now comes additional federal stimulus funds. The City also received Federal relief funding. The first round of stimulus funding was allocated in December 2020. The approximately $784,000 was used to address the added costs of responding to the pandemic. It was a wholly inadequate amount for a City like Santa Cruz to respond to the impact of the pandemic. The City is set to receive approximately $14 million in one-time Federal American Rescue Plan stimulus funds to help stabilize the budget. Being one-time funding, it will provide interim stability to the City, allowing the deferral of additional reductions; replenishing reserves; and, essentially, allowing the City the time to develop and implement a longer-range fiscal sustainability plan. But the federal dollars will not close the city’s structural deficit and the City Council must address either further liabilities and reductions or create a new revenue stream.
Here is the City’s draft budget breakdown from Santa Cruz Local (Storyline #5). • Parks & Recreation ($617,000 cut): Reduced budgets for San Lorenzo River levee maintenance, homeless camp cleanup, and tree work in wildlands. The City staff plan to search for grants to support camp cleanups. Annual events such as Woodies on the Wharf and the Japanese Cultural Fair would not receive financial support from the city. Temporary staff for the Civic Auditorium would be reduced. City staff plan to focus money and staff on high-demand areas that generate revenue, such as sports programs and childcare, according to Parks & Recreation Director Tony Elliot.
• Public Works ($348,000 cut): About $107,000 of savings is due to a grant for the city’s “Local Roadway Safety Plan.” Cuts include $63,700 to street materials and services. “A lot of this street work has been shifted to homeless cleanups and so some of this material (budget) has not been spent, so we think we’ll be fine this year by reducing it,” said Public Works Director Mark Dettle. • Economic Development ($181,000 cut): Cuts include reduced temporary staff, training, trolley operations, and property management. The General Fund capital improvement program, which funds major public facility construction projects, would remain mostly unfunded. Street resurfacing projects would not be funded next year, except for the Measure D allocated funds. The City’s unfunded capital improvement projects total more than $307 million. Unfunded transportation projects account for about $242 million. City Manager Bernal concluded his letter by noting, “Our focus during the 2022 budget year will be on not only recovery but also ongoing resilience. Because of the scale of the structural deficit, the City will continue to identify areas for expenditure reductions and explore the potential for a new revenue measure. Robust new revenue sources are needed to maintain existing essential services and address increased needs for business recovery, health and public safety, and infrastructure maintenance.”
In the days ahead, internal city and external community conversations will be on where will those ‘new’ dollars come from? Historically speaking, over the last two decades, the City Council has turned to the voters to seek new revenue for a variety of special projects, programs or to fund specific needs of the City. Here is a list of those Ballot measures approved by City voters since 2004.:
• June 2018 — Measure S. Increased the local Sales Tax from 9.00% to 9.25, the maximum allowed by the state
• November 2016 — Measure D County Transportation Tax. Impose a half-cent sales tax for 30 years for safety, pothole repair, traffic relief, and transit improvemen
• November 2016 — Measure L Cannabis Business Tax. Impose a tax of no more than 10% on gross receipts of cannabis (marijuana) businesses in the city
• June 2016 — Measure S Community Facilities District Library Bond. Authorize parcel tax on real property and authorize bonds to be issued by the Santa Cruz Libraries Facilities Financing Authority
• November 2012 — Measure Q Increased the Transient Occupancy Tax from 10.0% to 11.0%, effective in July, 2013
• November 2010 — Measure H Increased the Utility Users Tax from 7.0% to 8.5%, effective in spring, 2011
• November 2008 — Measure E Clean River, Beaches and Ocean special parcel tax. Imposed a parcel tax to be used to protect public health and wildlife habitat in the river, bay, and ocean
• November 2006 — Measure H Increased the local transactions and use tax from the 0.25% authorized by Measure F in March, 2004, to 0.5%, and removed the sunset clause
• August 2005 — Measure X Water, Sewer, and Refuse franchise taxes imposed to replace comparable franchise fees that had been discontinued because they were determined to be taxes rather than fees
• March 2004 — Measure F increased local transactions and use tax by 0.25%, with a sunset clause to end the additional tax after five years
Will the City Council move to place another revenue measure on the ballot this year or in 2022? Stay tuned.