The Proposed 66% UUT Increase is Unnecessary
In 2012 and 2014 the voters of Sierra Madre cast their ballots against City Hall sponsored efforts to raise the UUT. As a result, the voters have mandated that on July 1, 2016 the UUT be reduced from 8% to 6%.
The City’s official budget shows that the UUT reduction will cause revenues to fall by exactly $400,000 ($1,996,000 to $1,596,000). The official budget shows that this reduction is offset by increases in property taxes, sales taxes, and various fees. As a result, the change in actual revenues to the city year to year is only $230,000. That’s it.
The City says that it can’t possibly fill this $230k gap because it has already cut spending by over $2 million. That is false.
The City’s official budget for 2013 – 2015 shows General Fund expenditures of $7,051,508 for 2012 – 2013. By 2015 – 2016 General Fund expenditures had increased to $8,286,216.
The City has therefore not cut spending by $2 million. Instead General Fund spending has increased by over $1.2 million during the last 3 years alone. These spending increases were implemented with full knowledge of the fact that the UUT would be decreasing.
The spending increases have largely been driven by increasing employee costs, primarily associated with the police department. Regardless, before seeking a tax increase the City should deal with spending. Not because taxes are bad. But because the City has only a limited ability to absorb tax increases. The City should therefore do everything it can to make sure that any tax increase is applied to improving our civic life and not to purchasing overpriced services.
The City’s request for a 66% UUT tax increase does not pass this test.
The City’s Rationale for the 66% Tax Increase
The reason for the 66% UUT tax increase is provided by the City itself on its campaign Fact Sheet titled “What Does a 10% UUT Provide.” That Fact Sheet states:
“A 10% UUT will stabilize the current service levels for a few years while the City council continues to explore ways to achieve long term financial stability.”
This confirms that the City does not want the money to fund improvements to parks, the library, senior services, or infrastructure.
Instead, the City wants the money to maintain the status quo “for a few years” so that it can address “financial stability” issues at some point in the future.
That is exactly what the City said when it asked for UUT increases in 2012 and 2014. One could ask, what has the City been doing in the interim? But that would not be productive. We should instead ask what the City can do right now to our secure financial stability.
The Path to Financial Stability
The answer is obvious: As stated by the Pasadena Star News Editorial Board on February 3, 2016:
“The answer to the problem - to both problems – more than ever would seem to be moving rather quickly toward contracting with the Los Angeles County Sheriff’s Department in order to protect the people and property of Sierra Madre and their taxpayer dollars.”
In fact, contracting with the Sheriff is the only way in which our budget difficulties can be addressed in a way that will secure our financial stability on a going forward basis. This will enable the City to target future revenue increases to tangible civic improvements to our parks, library, senior services, and infrastructure rather than simply funneling it to a police department that can no longer meet the City’s needs and that the City can no longer afford.
Sierra Madre’s Disproportionate Police Spend
Sierra Madre’s 2015 – 2016 general fund revenues are budgeted at $8.9 million. Sierra Madre spends $3.9 million of that amount on police services. That means the City spends .43 cents of every dollar it takes in on police services.
Sierra Madre’s 43% police services spend rate is greater than that of virtually any other city around.
The impact of this disproportionate police spend is illustrated by comparing Sierra Madre’s budget to that of La Canada.
Despite having greater police service needs, La Canada spends significantly less on police services than Sierra Madre.
The reason: La Canada contracts with the Sheriff. Sierra Madre does not.
The Sheriff’s 20/20 Proposal Provides Increased Patrol Hours and Reduced Costs
In May 2015 the Sheriff presented Sierra Madre with a Municipal Law Enforcement Services Proposal – the “20/20 Proposal.” The key features of the 20/20 Proposal are:
By adopting the Sheriff’s 20/20 Proposal the City will serve both of its stated goals by “maintaining the current level of City services” and providing for the City’s long term “financial stability.”
The Time to Act is Now: SMPD is Incapable of Fully Servicing the City
In February Sheriff’s Deputies began patrolling Sierra Madre during all nighttime hours. SMPD continues to patrol during the daytime hours. This means that the City now has two police departments. This is costing the City $100,000 a month for at least the next four months.
The reason we have two police departments is that SMPD is not capable of meeting the City’s full time police service needs. In fact, the City presently has only 11 of the 20 officers necessary to perform its duties.
The City admits that to it must rebuild the SMPD and that it will have to spend more money on recruiting and training new officers. The City also has indicated that in order to recruit these new officers it will have to offer more “competitive salaries.” The City plans to fund this spending out of the 66% UUT increase.
The bottom line: The City will once again increase its police services spend if the 66% UUT increase passes.
Adopting the 20/20 Proposal Will Ensure that Future Tax Increases are Applied to Tangible Civic Improvements
Rather than seeking to rebuild a new version of the SMPD and asking for a tax increase to fund it, the City should act on the Sheriff’s 20/20 Proposal now. This will enable to achieve the “long term financial stability” that is the stated goal of the UUT increase. The only difference is that the goal would be achieved immediately, rather than after a “few years” of study as urged by the City.
More importantly, it will enable future council’s to approach Sierra Madre’s residents with tax initiatives that will be wholly directed toward improving our parks, library, infrastructure, and other tangible investments that will directly benefit our civic life.
That will not occur if the 66% UUT increase is passed.
The City's Unfortunate Tactics
As predicted, the City has artificially added costs to the Sheriff's proposal in an effort to hide the actual savings that will result from its adoption. Despite this manipulation, the City itself now concedes that the Sheriff's proposal will yield at least $3.6 million of savings over the next 8 years.
Reproduced below is a chart the city prepared to compare costs under the Sheriff/SMPD systems. Consistent with our prediction, the city has added costs designed to minimize the savings. These include:
At the same time, the city has not recognized any of the costs associated with rebuilding the SMPD, including the $400k to $1.2 million the city will be spending over the next 4 – 12 months to retain the Sheriff to patrol from 6 pm to 6 am while this rebuilding is taking place.
Nonetheless, even if one accepts all of the city's assumptions at face value, under the proposal we discussed (Proposal A below) the city admits that retaining the Sheriff will yield ever increasing annual savings, reaching over $500,000 in Year Five and over $800,000 in Year Eight. The City's analysis confirms that the savings resulting from retention of the Sheriff will total $3.6 million over the next eight years alone while, at the same time, increasing actual patrol hours by over 20%.
If the costs associated with retaining the Chief as Public Safety Director is eliminated, which it should be, the savings increase by $1.2 million ($150k x 8 years) to a total of $4.8 million.
These savings would go a long way to addressing the city's stated goal of attaining long term financial stability and freeing up money for civic improvements. They will not be achieved if the UUT increase passes and the SMPD is retained.