For the second time in as many years, the Lompoc City Council on Tuesday night voted against introducing a potential new tax measure as a way to pull the city out of its dire financial straits.
The council made the move with a split 3-2 vote at the end of its first full presentation from city staff on the 2019-21 biennial budget. Members of city staff, including City Manager Jim Throop, pointed to the city’s rising deficits and declining revenue before requesting approval to put a 1-percent sales tax increase up to voters.
After nearly two hours of discussion that included dozens of comments from community members, Councilman Jim Mosby made the successful motion to have staff bring back a balanced draft budget with no projections relating to an increased sales tax.
Mosby’s motion passed with support from Councilmen Victor Vega and Dirk Starbuck.
Although the motion effectively wiped out the prospect of a sales tax increase for the budget that will be presented at the first full budget workshop scheduled for 6:30 p.m. Wednesday, April 17, at City Hall, it did not kill the idea entirely. The council still has the option to discuss the recommended sales tax, or any other taxes or revenue-generating proposals, at future meetings throughout the budget process.
“Everybody says it’s just one penny, but remember, when you do the math, the money has to come from somewhere,” Mosby said of the potential tax increase, shortly after he cited a study that suggested that sales tax increases could lead to job cuts.
"I think it’s a lot larger than you think,” he added.
Dean Albro, the city’s financial manager, opened the discussion by presenting a gloomy outlook for Lompoc’s fiscal future.
He said that the city’s deficit is currently projected to grow to $3.7 million over the 2019-21 fiscal years and noted that the city’s liability to its unfunded CalPERS pensions for former employees is only going to grow. Albro said the city was at an important “crossroad” and had two options: Cut out of the deficit with reductions in staff and services or enhance revenue.
Albro and Throop argued for the latter.
The 1-percent sales tax would generate about $4.9 million per year, according to city staff, and would not be applied to groceries, prescription medications, rents or mortgages.
The staff also listed other possible revenue generators, like increased taxes on utilities, increases in transient occupancy taxes, selling ad space on city vehicles or hikes in things like parking and code compliance fines. Those options, Albro said, would not generate near the revenue that the proposed sales tax would.
The staff recommendation wasn’t new for the council. During the city’s 2017 budget process, then-City Manager Patrick Wiemiller proposed three new taxes — increases in sales, utility and transient occupancy taxes — as a way to generate increased revenue at that time. That proposal was ultimately shot down by the same three councilmen who turned away Tuesday night’s recommendation.
The taxes were proposed Tuesday as a way to maintain staffing, particularly in public safety departments.
Several people during the public comment period advocated for putting the tax before voters, particularly if it could mean avoiding cutting personnel in the police and fire departments. Some of those speakers noted the recent high-profile crimes in the city, including a still-unsolved homicide that occurred just this month, and said they’d personally be willing to sacrifice money from their own budgets to help keep or grow public safety staffing in the city.
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Others spoke out against increased taxation and instead asked the council and city staff to do more to raise revenue in other ways. One of those suggested ways was for the city to speed up the cannabis licensing process so that the taxes on cannabis commerce, which were approved in 2018, can be more fully realized. So far, just one dispensary has opened in the city, while several applications are still in the review process.
Mosby, Vega and Starbuck also each pointed to increased salaries for upper management in the city over the past few years as an issue that should be addressed before trying to get more tax money from the city’s already economically disadvantaged populace.
“A personal philosophy of mine is to live within your means; Lompoc is not living within its means,” Starbuck said after suggesting that the only salaries that are increasing in the city are those coming out of City Hall.
Vega said that cuts in “nonessential” areas, outside of police and fire, might have to be made.
Councilwoman Gilda Cordova, who was appointed to the council this year and therefore was the only person on the dais not involved in the 2017 budget discussions, said she wasn’t necessarily against a tax, but that she wanted to review the budget without the tax projections before having any conversation about taxes.
“As a businessperson I would like to think that my sense of urgency is not just to pass a tax, but my sense of urgency would be to figure out ways to be responsible with the current existing financial situation that we have, and figure out ways to better evolve our city,” she said.
The staff presentation suggested that the city will need to quickly figure out how to increase revenue.
Albro said that Lompoc’s current general fund reserve is just $1.7 million, when it should be at $8.4 million per city policy.
“If we did full service, it’d be almost gone in one year,” he said of the reserve, though he noted that an increase in frozen positions has helped save that reserve from dropping further.
Throop noted that he has worked on municipal budgets for about 30 years and that Lompoc’s current state has him “more concerned” than any of those others.
A tax measure would need support from four members of the council to be put on the November 2020 ballot.
For a special election, which could be held at any time at a city-estimated cost of about $150,000, the council would need at least a 4-1 vote to put the measure on the ballot and a unanimous vote to call the special election.
Mayor Jenelle Osborne, who supported the proposed tax measures as an option when she was a councilwoman in 2017, said Tuesday night that she still felt like the tax proposal should go before voters.
“My fear right now is that we go down the path of proving we can solve the next two years with cuts and the (council) majority sits here and decides we’re done,” she said. “And the real problem is the next two years is not our only problem. This debt from CalPERS is not going to go away. It’s going to continue to grow and we cannot cut our way out of it. We will begin to dig such a large hole that instead of climbing out of it, it will start to fill with water and we will drown as a community.”