« Study Area 9 | Main | Pants On Fire »
October 22, 2008
Is Chico's Budget Balanced?
 |
|
| Image: The city General Fund and Parks
deficit in red without transfers away from road and transportation
improvements. Money from a gas tax we all pay has been transferred
away from roads to cover the costs of other spending. If you wonder
why bike routes are planned but not built, or why roads and
traffic
issues
take
so
long
to address,
here
is the culprit. Mark Sorensen, a candidate I strongly support for Chico City Council, has added a page to his web site discussing whether or not Chico's budget problem is really fixed (here is the web page http://www.marksorensen.net:80/budget.htm ). As in the 2006 election some candidates appear to be downplaying the budget problems facing Chico, and even going as far as to suggest they've been fixed. Sorensen uses graphs/charts from the city's budget presentations to show that that's not really the case. There are a few points that need to be made when discussing the problems facing Chico's money woes. First, most of the headway has been made on closing the gap in the annual structural deficit in General and Park Funds. This does not accommodate growth in the size of city government. It does not address the reliance on redevelopment money, Chico's VISA card, or the shortfall in anticipated sales tax income that's sped along by a poor national economy and closure of stores like Mervyn's a top 25 producer. Mark's web site spells out some of the problems in a direct and descriptive way. People should read it, and be thankful that some candidates are expressing an understanding of where we sit money wise by communicating actual numbers. Sorensen points out that the 2008-2009 fiscal year deficit is exceeding $7 million and writes the following about proceeds from income tax and the RDA tax increment income assumptions. Sales tax revenue is vitally important to our General Fund as it supplies about 43% of all General Fund revenues. To get to the not-so-rosie $7 million dollar General Fund deficit spending forecast for 2008-2009 the city is planning sales tax revenue to be over $612,000.00 higher this year than last year. And they project that rate of growth throughout the 10-year budget forecast. They expect annual sales tax revenue to GROW by more than 50% over the course of the 10 year projection. Meanwhile the reality of the situation is that in the two most recent quarters for which we have the numbers, Sales Tax revenues were in fact flat. There was no gain. At best, Q2-2008 is expected to be flat (we'll know by Nov 1st). It would not be realistic to assume that Q3 or Q4 of 2008 will deliver the gains that are being "assumed" by the current budget. A year over year decline in revenue would be more realistic. In the current budget, Property Tax revenues are assumed to increase 4-5% each year. Meanwhile the reality of the situation is that we are seeing slight declines in real estate valuations. While the property tax valuation & assessment methods do tend to delay and dampen the impacts of immediate swings, and annexations have changed the size of our City, it does not seem realistic to assume that Property tax revenues will increase 4-5% each year for the next 10 years. The RDA similarly assumes that Property Values will continue to rise. The Property Tax revenue situation can become a genuine problem for our RDA (Redevelopment Agency). The RDA has millions of dollars of debt to service, and millions of dollars of projects in process and planned. Unfortunately, we've spent multiple millions - unwisely. Bottom line, aside from any state revenue raids (which will come later) I believe that 2008-2009 General Fund revenues are overstated by more than $1 million. And, that many of the other operating funds are under similar negative pressures. ...This is why I say that the City Budget is NOT balanced. And why I have some frustration with those who suggest that the spending problems are fixed. The progress made with respect to deficits in our General and Park funds is not the totality of our budget problems. Long term expansion of city services, the Redevelopment Agency, development impact fee based funds for parks and buildings, enterprise funds (departments run like businesses) are in many cases in the red. During the ER audio interview with Councilor Ann Schwab she said that the dollars spent on studies and consultants was money well spent. When the ER asked how much money the city had spent on consultants she answered that she didn't know. Nobody knows, or at least nobody is telling. Reflexive defense of past spending is not helpful to identifying and solving the budget problems. It is also disappointing that the city would cancel its October budget update. Openness and a frank discussion of where the public funds stand 3 years after the budget problems became public is required. Direct questions related to assumptions made regarding the budget solutions are also necessary. I'm glad Mark Sorensen has taken the time to highlight these issues on his web site. It helps immensely to have a concise and visual resource that explains the budget problem. Image below: The city is running in the red in a variety of areas. Balancing the General Fund structural deficit, which still may not be accomplished, is the tip of the iceberg. |
|
 |
|
| Bug Out: Kudos go out to
the City Council for unanimously supporting the expansion of a local, successful,
business (see ER story
here). This is the most active stance a city council
can take in creating jobs and sales tax income in our current situation. It
is of course up to the business owner to continue to succeed, but that's
always
been
the
case. Disc Golf Out: The City Council will make a decision on improving or removing disc golf from Bidwell Park at its 11-18-2008 meeting. Just one month from now. |
|
 |
CI Challenge: |
Posted by Lon at October 22, 2008 08:51 AM
Comments
oh boy, my husband is writing you in for CARD, right now!!! And Gregg. and Ralph Wiggam for CUSD. And me and my dog Biscuit for city council.
God she's a bitch, I hope she doesn't win. She bites and has this bark, oh it's awful. Although, the image of her treeing Mary Flynn gives me a smile.
If I win, we get bier gartens on every corner, like in Deutschland. That's frankly the only thing the Germans got that I can relate to, the rest of their country is one big new urban clusterjam.
Viva la election!
Posted by: juanita at October 24, 2008 10:37 AM
I would support Chief Wiggum for CUSD. And Ralph for that matter.
Lon
Posted by: Lon at October 24, 2008 11:07 AM
Unfortunately, this 10/25/08 WSJ story suggests that our State did experience a 6% decline in sales tax revenue in Q3-2008.
Hopefully we fair better locally...
Locally, in previous quarters, sharp rises in sales tax revenue from petroleum sales made up for drops in sales tax on consumer items...Yes, part of that "pain at the pump" did go to support local governement.
But, it would seem that we've exhausted that source of backfill.
http://tiny.cc/fUePY
http://online.wsj.com/article/SB122488665240868147.html
Posted by: Mark Sorensen at October 25, 2008 08:40 AM
Mark,
Thanks for the info. I believe the local sales tax report will be out November 1st. In fact I heard that the reason the October budget update was cancelled was...
The latest sales tax info would not be available.
The staff did not have time to put all of the information together.
The City Manager didn't want the budget update to become part of the election.
That last one's pretty funny.
Lon
Posted by: Lon at October 27, 2008 09:00 AM
CIC: I'm guessing field markers.
Posted by: Gregg Payne at October 29, 2008 09:55 AM