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HomeMy WebLinkAboutStaff Report 2.A 06/25/2012 • g-e•vida, Ite.vw#2 .74. cp,.LU W 85e DATE: June 25, 2012 • TO: Honorable Mayor and Members of the City Council FROM: John C. Brown, City Manager SUBJECT: Discussion and Possible Action Related to Placing Tax Increase Measure(s) on the November 2012 Ballot RECOMMENDATION It is recommended that the Council consider and provide the staff appropriate direction regarding placing a tax increase measure, or measures, on the November 2012 ballot. BACKGROUND At the City Council's May 21, 2012 budget meeting, Councilmember Renee expressed strong concern with the degradation of City services due to ongoing budget reductions. She requested that the topic of a local sales tax, to restore and enhance city services, be agendized for Council consideration. There was Council consensus to agendize this matter. It was requested that the conversation include the Transient Occupancy Tax. The Council briefly entertained a similar discussion in 2010, and further explored increasing the TOT. An increase measure was not placed on the ballot at that time, due to a lack of support from the lodging industry and business community. The Council further, and briefly, entertained a tax increase conversation during its 2012 goal setting session. Council asked staff to explore the feasibility of placing a TOT increase-on the June 2012 ballot. Doing so was infeasible, due to the findings that would have needed to have been made and supported at that time, the cost of placing a measure on the June ballot, and the continued lack of support from the lodging and business community. If is estimated ihat,Petaluma will receive approximately $9.9 million in FY 2012/13. This represents the City's approximate one (1%) share of the State-wide base uniform sales and use tax. It is further estimated that Petaluma will receive$1.350 million in TOT proceeds in FY 2012/13, based on.Petaluma's TOT rate of ten (10%) percent. Petaluma's base sales tax rate is currently consistent with three other jurisdictions in Sonoma County. Other jurisdictions have imposed increases ranging from one quarter(1/4) to one half (1/2) cent in local sales tax. One jurisdiction, Healdsburg, has placed a one half cent increase on the November 2012 ballot. The following table provides a comparison of sales tax rates in Sonoma County cities: Agenda Revie �� City Attorney Finance Director City Manager 5C/� Sales Tax Rate Comparison,,Sonoma County Cities * CITY RATE Cloverdale 8.0 Cotati 8.5 % Healdsburg 8.0 % t Petaluma 8.0 % Rohnert Park 8.5 % Santa Rosa 8.5 % Sebastopol 8.25% Sonoma 8.5 % 2 Windsor 8.0 % *State Board,of Equalization,May 2012, except City of Sonoma 1 'A cent increase on November 2012 ballot 2 %cent increase approved on June 2012 ballot TOT rates charged in Sonoma County generally consist of two components, the rates adopted by the various jurisdictions to fund services within the cities, and a-separate rate collected by most jurisdictions to support a county-wide or local business improvement area. TOT as discussed in this report excludes the rates collected to support BIA's. Of the cities in Sonoma County with transient occupancy taxes, Petaluma's rate is consistent with four other-jurisdictions. Other rates range from nine (9%) to twelve(12%) percent. The following table provides a comparison of TOT rates in Sonoma County: Transient Occupancy Tax Rate-Comparison, Sonoma County Cities CITY RATE Cloverdale 10 % Cotati 10 % Healdsburg 12 % Petaluma 10 % Rohnert Park 12 % Santa Rosa 9 % Sebastopol 10 % Sonoma 10 % Windsor 12 % DISCUSSION As previously indicated, the City's estimated sales tax�-revenues for fiscal year 2012/2013 are $9.9 million. Increasing the rate to eight and one-half percent (8.5 %), consistent with three other Sonoma County cities, would generate an additional $4-_95 million in annual revenues for Petaluma. A one-quarter cent (.25%) increase would net an estimated $2,475,000 annually. If adopted as a general purpose tax, these funds could be'utilized for any city general governmental purpose. As the Council is aware, the City of-Petaluma has experienced-extreme financial hardship since FY 2007/08. Funding for a long list of City services was reduced and approximately 20 percent of the City's workforce was laid off; eliminated, or vacant positions frozen. Funding for capital projects, facilities maintenance, vehicle replacement, and reduction of long-term pension liability was also suspended, or severely reduced. This brought General Fund spending down from a 2008 level of$48 million to a.current level of$32.5 million. In the process, General Fund reserves were exhausted. As if this situation was not sufficiently severe, the loss of Redevelopment has shifted employee costs from the Redevelopment fund to the General and other funds, funding.for regional and local transportation projects is threatened, and funding for non-profit organizations who provide a social safety net is lost: A recent correction in charges has further exacerbated financial hardship, leaving approximately$500,000 in storm water maintenance costs per year in need of an alternate funding source. This situation has created a large pool of unmet needs, many of which could be addressed with the additional revenuesMat a sales tax-increase could provide. For discussion purposes, City departments have submitted for your consideration what they consider to be their most pressing needs or the best use of increased sales tax proceeds (attachments). These items are not prioritized. Nor do-they include the projects that would be funded with the parcel tax proposed by the Petaluma Friends of Recreation (PFOR) if that measure is approved by the voters. I would suggest that from among all these items, some of the most pressing are restoration of the City's reserves, street reconstructions and maintenance, vehicle replacement, street light maintenance, dredging, and storm water maintenance. Unless the Council is interested in implementing a permanent or long-term increase, I would suggest treating these monies as one time revenues. In doing so, avoiding programs that contain staffing or regularly recurring costs is also recommended. If the Council is interested in a longer term, or permanent increase, the revenue generated from increased,sales tak could be leveraged by using it to support bonding for public improvements. In particular, a significant amount of road work could be done if financing could be secured against this revenue source. This funding could also be used to provide a solution to storm water maintenance financing challenges. If the Council wishes to pursue a sales tax,increase, the monies can be used for either special purposes, or for general purposes. Asa special purpose tax, which would provide guarantees to the voters as to how the funds would be spent, a simple majority vote of the City Council would be sufficientto Mace the tax measure on the ballot, and.a2/3 majority vote of the electorate would be necessary for the measure to pass. A general purpose tax would provide the Council broader spending'discretion, but less specificity to voters. Typically, general tax measures must be approved by a 2/3 majority of the legislative body for placement on the ballot, and approved by a simple majority of the electorate to pass. There is caselaw indicating that the 2/3 council vote requirement for placement of a general tax before the voters does not apply charter cities like Petaluma. If a tax increase is to be placed on the ballot, staff recommends that it be a general purpose tax, rather than ayspecific purpose tax. The Council will also need to determine, if a measure is to be placed on the ballot, whether it will be temporary or permanent, and if it is to be temporary, for how long. A permanent or longer term tax increase would fund more need, would provide greater long-term stability, and facilitate the use:ofsome of the'proceeds for servicing.bonded indebtedness. A temporary tax 3 The Council will also need to determine,if a measure is`to'be placed on the ballot, whether it will be temporary or permanent, and if it is to be temporary, for how long. A permanent or longer term tax increase would fund more need, would provide,greater long-term stability, and facilitate the use of some of the proceeds for servicing bonded indebtedness. A temporary tax increase maybe viewed more favorably by the voters and be more likely to pass. Of the eleven jurisdictions that placed sales tax measures on the June ballot, only one did not-place a "sunset" on the increase. Only that one measure, of the eleven,.failed. Of those measures with sunsets, eight were for five years or less, and all of those measures were for '/ cent increases.1 With respect to the Transient Occupancy Tax, the City Council has shown interest in the past in a two (2) percent increase. Based on estimates for FY 2012/13 this would generate approximately $270,000 per year, and would set Petaluma's base TOT rate at 12 percent. This would equal the highest rate of Sonoma County cities, and has been opposed in the past by the local lodging industry and the business community. As with sales tax, if an increase is adopted as a general purpose tax, these funds could be utilized for any city general governmental purpose and would only require a simple majority vote of the electorate to pass. If the use of funds is designated, a 2/3 majority vote of the electorate would be required. In the past, discussion regarding the use of these funds has focusedon augmenting monies available for promoting tourism. Proposition 218 requires that local elections on general taxes must be consolidated with regularly scheduled general elections for members of the governing body of the local government. Local elections on general taxes,do not have to be consolidated with legislative body member elections in cases where the legislative body declares by a unanimous vote that an emergency exists . The consolidation requirement does not apply to special taxes. Special taxes may be offered at elections other than general elections for legislative body members. If the Council-intends to place a tax measure or measures on the ballot for November, it must approve offering the measure(s) to the voters by August 10, 2012. The Council may act on the measure(s) by resolution, although the actual measure(s) for consideration by the voters would be in ordinance form. Timing, including all applicable noticing, would require the Council to act to place any tax measure for the November, 2012 election before the voters by the regular meeting of August 6, 2012. FINANCIAL IMPACT The estimated costfor placing a measure on the November ballot ranges from $15,639 to $31,277. This is based on the County Registrar's estimate of S.50 to $1.00'per voter. Currently there are 31,277 voters registered in Petaluma. if the Council places two measures on the ballot, cost estimates range from $31,277 to $62,554. Costs would be borne by the General Fund but are not currently budgeted. ATTACHMENTS 1. Proposed Use'of Tax Funds—memos from Departments 2. Memo regarding Potential Social Service Safety Net Coleman, "Local Revenue Measures:in California, June 2012 Preliminary Results",CaliforniaCityFinance.Com. June 6, 2012. ATTACHMENT 1 Brown, John • From: campbellzone @gmailicom on behalf of Geoff Bradley [geoff @mplanninggroup.com] Sent: Thursday, June'14, 2012`14:18 To: Brown, John Cc: Hines, Heather Subject: Planning Items in the Eventof Improved Budget Scenario John --Heather and I have discussed this and the only items we have come up with are the IZO amendments that the Council has prioritized in the past: • Update Sign Code. • Revise Hillside Ordinance • Update Historic Preservation..Ordinance • Update SMART code (warrants, allowed uses, etc.) • Public Art update • Noise Ordinance overhaul There:may be enough changes here to warrant a comprehensive update of the 1ZO. These typically run $100,000 to $150,000 in 2012cdollars. Hope that helps. thanks Geoff Geoff I. Bradley, AICP bi-GROUP Principal 579 Clyde Avenue, Suite 340 Mountain Views California 94043 650.938.1111 x102 METROPOLITAN PLANNING GROUP n nru dcsego nq ui9ali pnuru;liZ Staffing Solutions.Policy Planning.Urban Design.Sustainability Services mhlanninnuroup.com NI-LAB loin the conversation on l.thicam tr.1<e-.dmh;: Irmo• litln.ant Beet Ph.valnus np]anninegroup.coniimlab From: St. John, Dan Sent Monday, June 11, 2012 11:01 To: Bates, Curtis; DeNicola, Ron; Hill, Denise; Rye, Joe; Scherzinger, Remleh; Simmons, Steve; Zimmer, Larry Cc: Brown, John Subject: Needs for Public Works and Utilities Needs List - PW&U Item One Time Annual Costs Reference Cost Street Pavement Deferred $9,000,000 2012 PCI Report Maintenance Community Center Roof $200,000 Staff Assessment Replacement Community Center Deferred $115,000 Staff Estimate Maintenance Cavenaugh Center Deferred $150,000 Staff Estimate Maintenance Marina & Turning Basin $2,000,000 Guess Dredging Street Light Deferred $50,000 $75,000 Maintenance Traffic Signal Deferred $150,000 $75,000 Maintenance Street Maintenance $150,000 Crack Sealer Equipment Equipment ADA Plan Implementation $50,000 Legal/Risk Opinion Stormwater Program $480,000 "look forward" estimate Parks Deferred Maintenance $150,000 $75,000 Totals $2,965,000 $9,755,000 Sincerely, Dan St. John, F.ASCE Director, Public Works and Utilities City of Petaluma 202 N. McDowell Blvd Petaluma,CA 94954 707-778-4593 office 707-331-4844 cell l CITY OF PETALUMA; CALIFORNIA MEMORANDUM Police.Administration, 969'Petaluma Boulevard North, Petaluma, CA 94952 (707) 778-4377 Fax(707) 778-4376 E-mail:police @ci.petaluma.ca.us DATE: May 29, 2012 TO: John Brown, City Manager FROM: Dan Fish, Chief of Police SUBJECT: Proposed Use of Tax Funds If the City of Petaluma was to establish a tax increase, I would propose the following additions to the police department as critical needs and top priority reinstatements. Dispatcher Position The staffing levels in dispatch are precarious. The recent freezing of a position to balance the budget will stretch call taking and dispatching'to the limit and will reduce our ability to quickly and effectively dispatch calls for service. Any extended absences (vacation, injury, illness, FMLA, etc.)of communications center staff will create overtime expenditures. Relief could be accomplished by unfreezing the fulltime dispatcher position or by increasing allocation to part time staff and hiring additional part time personnel to make up the difference but reducing benefits costs. Cost: $100,000 (approximate) Community Impact Program Create the Community Impact Program which would be tasked with addressing a,number. of quality of life issues in the community. My vision for this unit would include unfreezing a full time Police Sergeant position for supervision, five (5) full time Police Officer positions and a Community Service Officer. The duties would include School Resource Officers, Gang Education and Enforcement, Alcohol Enforcement Officer, Narcotics, Code Enforcement, Abandoned Vehicles and Problem Oriented Policing. This unit would take the place of the previously established Street Crinies Unit and would be assigned to a Lieutenant under the Special Operations Division in the Police Department Organizational chart. Cost Police Sergeant $170,000 Police officer(5) $750,000 Community Service Officer $ 80,000 $1,000,000 I City of Petaluma, California Memorandum Petaluma Fire Department, 198 D Street, Petaluma, CA 94952 (707) 778-4390 Fax(707) 762-4547 E-mail:.firedeptna ci.petaluma.ca.us DATE: May 31, 2012 TO: John Brown, City Manager FROM: Larry B. Anderson, Fire Chief SUBJECT: Sales Tax Measure — Fire Department Items for Consideration John: Per your request for a list of items that might be considered for funding from a sales tax measure, the following three items (categories) are submitted as options: 1. Fleet Replacement Program 2. Communications.Center 3. Fire Prevention Bureau Position Staffing For a quick summary, if all items were funded as outlined below, the cost, as well as the amortized cost over a six year period, would be: Total Cost $3,673,500 Amortized $612,250/year. Fleet Replacement Program Description - The fleet replacement program includes all fleet that is essential to emergency and support operations. It includes fleet that is now past due through the next six years (FY 2018/19). There are a total of 21 pieces of equipment utilized in the Fire Department fleet, including reserve apparatus. Because fleet is rotated from front line to reserve, the total fleet replacement inventory is 17, not 21. Summary Scope of Cost— The funding required to bring the fleet replacement program current through the next six years is: Total Cost $3,273,500 Amortized $545,583/year. Detail — The following apparatus are scheduled for replacement in the order listed. The apparatus listed only includes°fleet that is past due (4 units) and/or scheduled for replacement over the next six year period: 1.. Type 3 Wildland Engine -$350,000 - This unit (9341) is currently 15 years overdue for replacement. - Upgrades existing unit from a Type 4 to a Type 3 unit. - Unit is scheduled for replacement every 15 years. 2. Emergency Response/Support Vehicle - $44,500 - Unit 9305 (FM)i is:currently6 years overdue for replacement. - Scheduled to be replaced every 10 years. 3. Emergency Rescue/Special Operations Boat - $65,000 - IRB Unit (Boat) is currently 5 years overdue for replacement. - Scheduled to be replaced every 10 years. 4. Type 1 Structural Fire Engine - $500,000 - Unit 9382 is currently3 years overdue for replacement. - Scheduled to be replaced every 15 years. 5. Type 1 Ambulance (a) - $200,000 - Unit M991 is due for replacement (now) FY 2012/13. - Scheduled to be replaced every 6 years. 6. Support Vehicle 1 -$44,500 - Unit 9320 (INSP) is due for replacement in FY 2013/14 - Scheduled to be replaced every 10 years. 7. Support Vehicle 2 - $44,500 - Unit 9321 (INSP) is due for replacement in FY 2013/14 - Scheduled to be replaced every 10 years. 8. Battalion Command Unit - $75,000 - Unit 9301 is due for replacement in FY 2015/16. - Scheduled to be replaced every 10 years. 9. Aerial Ladder Truck - $1,200,000 - Unit 9351 is due for replacement in FY 2015/16. - Scheduled to be replaced every 15 years. 10.Emergency Response/Fire Chief Vehicle --$50,000 - Unit 9300 is due for replacement in FY 2016/17 - Scheduled to be replaced every 10 years. 11.Type 1 Structural Fire Engine - $500;000 - Unit 9383 is due for replacement in FY 2016/17. - Scheduled to be replaced every 15 years. 12.Type 1 Ambulance (b) -$200,000 - Unit M993 is due for replacement FY 2018/19. - Scheduled to be replaced every 15 years. Communication Center 1. REDCOM JPA Dispatch Services - $250,000 (annual ongoing costs) - Base dispatch service cost. - MDC replacement. - MDC air-card. Fie Prevention Bureau Position Staffing (Replacement) 2. Fire Inspector! Position - $150,000 annually - Annual wages and salary. Benefits ,O CITY OF PETALUMA, CALIFORNIA MEMORANDUM Finance Department, 11 English Street, Petaluma, CA 94952 (707) 778-4352 Fax(707) 778-4428 E-mail:financetaci.petaluna.ca.us DATE: June 19, 2012 TO: John Brown, City Manager FROM: Bill Mushallo, Director of Finance SUBJECT: Critical Needs City-Wide and in the Finance Department The purpose of this memorandum is twofold. The first goal is to provide you with items that are in need of funding on a City-Wide basis. The second objective is to provide a summary of critical needs within the Finance Department. There are several areas within the City that are desperately in need of funding. I will itemize them individually below. 1. Vehicle and equipment replacement fund. The vehicle and equipment replacement fund balance is approximately $150,000. This amount is dangerously low when taking into consideration replacement needs. Contributions to the fund have varied but the General Fund contributed between $200,000 and $400,000 annually during several previous years and a minimum annual contribution in this range would be prudent. 2. Rate holidays. During the past two budget cycles,GenerafFund rate holidays totaling $212,100 annually have been included for the General Services and Worker's Compensation funds. Reserves are being depleted due to these holidays and eliminating them would stabilize fund balances. 3. Storin water utility funding. As discussed during Monday's Council Meeting approximately $500,000 is required annually to fund storm water system maintenance activities. 4. Replenish General•Fund reserves up to the 15% of expenditures goal (approximately $4.8 million) over the duration of the sales tax initiative. 5. Increase economic development funding 6. Street maintenance funding 7. City Hall improvements and improvements to other City facilities • 8. Alternative energy initiatives The second goal of this.memorandum is torespond,to your request to.provide a list of the most critical needs withifrthe Finance Department to be funded should additional revenues become available. I have analyzed the Department's resources and have determined the following areas to be thehighest priorities and critically in need of additional resources: 1. Administrative supportto assist with Council item preparation, policy updates, budget and CAFR document preparation, RFP development, PRA requests, etc. 2. Accounting Technician support to assist with lower/mid=level accounting duties. These duties include;bank:reconciliations and associated research, treasury report development, grant reporting,journal entry preparation, fixed asset accounting, daily cash receipts, etc. This would free up;Accountant/Analyst time to do needed account analysis,budget analysis, year-end reporting and analysis, report preparation (Le. AB=1600), etc. The most efficient way to accomplish the tasks mentioned above would"be-to fill either the vacant Accounting Technician or vacant Administrative Technician position. The fully burdened cost of filling either position would be approximately $100,000. Brown,John From:- Brodhun, Scott • Sent: Monday,;June 18, 2012 16:30 To:' Brown, John Subject: Sales Tax Initiative John, I'm hot sure if you want narrative with these things. I'm happy to write this, and other dept's narrative as is necessary. Parks and Rec: - ReinstatePark Maintenance II Workers from PW. (3) $300,000 annually Reinstate frozen Park.Maintenance leadworkers (2) $220,000 annually - Reinstate frozen Park Maintenance,I (2) $200,000 annually - Reinstate and Upgrade Park'Maint. Seasonal Worker Program $100,000 annually - Reinstate Park Maintenance.Services &'Supplies?Budget $ 90,000 annually - Reinstate Frozen Recreation Coordinator Position $80,000 annually - Reinstate Frozen OA II Position at Comm.:Center $80,000 annually - Replace,Park Maintenance Equipment (3 mowers) $175,000 one-time - Museum Seismic Retrofit $600,000 one-time Total,Annual!.Expense: $1,070,000 Total One-Time`:Expense: $ 775,000 Total Cost: $1,845,000 • 1 ATTACHMENT 2 CITY OF PETALUMA, CALIFORNIA MEMORANDUM Housing Division, 27 Howard StreEt,.Petal,Ima, CA.94952 (707) 778-4484 Fax.(707) 778-4586 E-mail:housing@ci.petalitma.ca.us DATE: June 20,20I2 TO: John Brown, City Manager FROM: Bonne Gaebler, Housing Administrator SUBJECT: Potential Social Service Safety Net John: As you requested, this memo is in response to Councilmember Renee's suggestion regarding the potential for a "backfill"revenue source to replace the now-defunct redevelopment low-mod housing set-aside.in order to continue to serve our most vulnerable citizens. The City Council goals, as articulated in the City's 2010-2015 Consolidated Plan and 2009-2014 Housing Element,emphasize programs and projects which provide support and assistance for: Seniors Youth Persons with a disability Additionally, the most recent Census data shows that the two fastest growing demographics in Sonoma County are Seniors and Latino families. In previous years, the City Council has allocated redevelopment resources to the following nonprofit agencies/programs on an annual basis to address the needs of those populations: Petaluma People Services Center Rental Assistance Program 5153,500 (including senior"close the gap" assistance) Salvation Army Transitional 1-lousing $75,000 (homeless families) COTS Family Shelter $259,000 Singles Shelter $300,000 Transitional Housing $75,000 (veterans/singles) Rebuilding Together Petaluma Housing Rehab $75.000 (senior/disabled) Boys and Girls Club Low-income Youth Program $400,000 North Bay Children Center LatinoYouth Program $50,000 PEP/Eden/Burbank Potential New Development $250,000 (senior/family rentals) Total Annual Allocation for Social "Safety-Net" Programs $1,637,500 If you would like additional information, please feel free to call me at X484. \k