Item no. 6 on this Tuesday's City Council agenda is a discussion of a possible suspension or decrease in the Utility Users' Tax. So what we need to discuss here is just how did we get to this point? And was the trust the voters put in City Hall betrayed in the first place? Let's dig in.
I've selected several newspaper articles that were written at the time the tax increase scenario was being rolled out to the voters. This starts as the story of how Measure U was successfully sold to the taxpayers of Sierra Madre. But then something happened to make the ending an unhappy one.
The first article we'll cite was printed in the true paper of record here, The Sierra Madre Weekly. It was given the scary title of Committee Hears Harsh Realities of City Finances, and was written by Erica Blodgett. In this segment we can see that our fiscal condition was being described then as being in horrific straits. Here are the most alarming passages:
"According to the analysis of the initiative prepared by the city's finance director, Karin Schnaider, the cost of the initiative could be anywhere from $759,000 to $1,243,000 annually with the potential for it to go as high as $1.4 million depending on how current salary negotiations unfold in a number of cities the initiative references ... If the city does not find a way to increase revenue and the (Police pay increase) initiative passes there is a possibility that one or all of these services (paramedics, library, etc) could be eliminated. In order to put all the information together the ad-hoc (finance) committee has created a subcommittee to evaluate how much money different measures - utility users tax, parcel tax, assessments - could generate and what the community would tolerate."
In a typically one-sided Mountain Views "Observer" article (10/26/07), a front page sales pitch titled "Councilman Buchanan Speaks Out: A Sustainable Future For An All America City," found the former Mayor having this to say:
"What we ... know is that at the end of two years current revenue streams will not cover the cost of existing general fund services. Revenue increases (mostly from property tax, utility users tax, and limited sales tax), do not keep pace with the cost of delivering existing services."
There is no record of the Mountain Views "Observer" offering similar space to present the argument against raising the Utility Users' Tax. But if they had, the question would have been this. How could John Buchanan have really known that the City was in the kind of fiscal distress he claimed? After all, the City of Sierra Madre had at this time not completed fiscal audits in the previous 4 years! Something that had cost Sierra Madre $25,000 in state levied fines. And, as you will see later in this article, it is this very thing that has now put the UUT hike in jeopardy while causing this City considerable embarrassment in the daily press.
The Ad Hoc Finance Committee was those citizens tasked with the unenviable chore of creating an argument in favor of raising the UUT rate. Here is how the gig was described in a Sierra Madre Weekly article titled Committee Makes Recommendation to Council:
"The ad hoc committee had to confront and discuss finding possible support for operational needs in three areas. That would include for the police department and paramedic services through possible cost of living adjustments; making recommendations to the council on the source of new revenue; and show council members just how much revenue will be generated."
And, in what seemed to this observer at the time to be a predetermined conclusion, the ad hoc finance committee did indeed recommend a tax hike. They had combed through all the numbers provided to them, and based on the information available to them at the time, what other conclusion could they come to than increase the UUT?
"A six percent increase in (the) utility user tax, and creation of a special revenue tax are among the recommendations made by the committee. By raising the utility user tax from six percent to 12 percent, the city would receive a windfall ... Councilman John Buchanan said there is a strong backing for the raise in the utility user tax."
Long story short, the UUT hike was put on the ballot. All of the information dug up by the Ad Hoc Finance Committee was provided to the voters and, trusting in both the veracity of those making the tax increase recommendation and that the numbers provided by City Hall were for real, the voters approved Measure U overwhelmingly.
But it turns out that those numbers were nowhere near accurate. And the warnings put out by the anti-tax hike minority, that a city that had not completed it audits in 4 years had no business asking the taxpayers for more money, turned out to be spot on. And almost a year to the day later an article published by the Pasadena Star News ("Audit finds extra $1 million in Sierra Madre") dropped the big one:
"An independent audit of the city's finances has found more than $1 million more in the city's reserves than had previously been thought, but not everyone in town is celebrating the windfall ... An audit of the fiscal year 2006-2007 found an increase in (the) general fund balance of $1,036,795, attributed in part to higher-than-expected revenue from property taxes and a corrections (sic) in accounting records ... The audit is one of two recent financial reports that paint a less bleak portrait of the city's financial status than in the past ... But the good news doesn't have everyone cheering. At least one city official, Mayor Kurt Zimmerman, has focused instead on questioning why voters were asked to pass a utility users' tax hike in 2008 ... "When the voters approved the UUT tax increase, they were unaware of this surplus," Zimmerman said. "I was under the impression that the city's finances were in dire straits and it turns out that is not the case."
So here's the problem as I see it. Perhaps the city does still need the money that was raised by the Utility Users' Tax hike, and that basic services here really would suffer should it be removed as one of the City's revenue raising options. And that is a strong argument. The matter should be looked into and the case made that the money is needed.
But there is a catch. This additional money was raised through a tax increase initiative put on the ballot and approved by the voters. And the missing $1.o36 million dollars was not to be found in the information provided to the voters when they were considering that hike. And that is because the proper audits were never done. In other words, City Hall went out and asked for a tax increase when it didn't really have the foggiest notion of how much money it really had. Incompetence was multiplied by chutzpah, and the sum result was that the voters gave themselves a tax hike based on highly inaccurate data.
Now the argument that I find particularly appalling goes something like this: The City needs this money, and the voters did approve the increase. Maybe the information put out was bad, but we need the money, so we shouldn't risk losing it by doing anything about the UUT.
So can anybody tell me just how ethically wrong that argument is? We got what we needed out of the taxpayers, so who cares that we fed them garbage to get it? In this the era of tea party tax protests, I'm surprised Sierra Madre hasn't painted City Hall a nice pekoe orange yet.
The best way to deal with this is for the City to first admit it made a bad mistake. It needs to subject itself to a forensic audit for all 4 of the years that the audits were screwed up. An outside counsel also needs to be brought to discover just exactly how much was actually involved and how that money was spent. Every dime. All the current audits have done is rearrange the same bad numbers that existed before. Garbage in, garbage out as the phrase goes.
And then once all the money is accounted for, and forensic audits completed, then the case must be made once again for a Utility Users' Tax increase. We probably need it, but the people who have to fork over the money should be allowed to kick the tires again. Trust betrayed is hard to regain, but that attempt must be made.
And only when these steps have been taken should the question of a UUT increase be put back on the ballot. We deserve a revote. If the money is needed, I suspect the voters will approve it all over again. But at least this time everyone will know that the information is accurate.