April 12, 2012
Dear Community Leaders,
On Thursday April 5th nearly 70 residents attended the first in a series of community meetings to discuss the City’s budget challenges. The purpose of the meeting was to provide information on the City’s current budget situation and address why immediate action is needed to resolve the problem. The session was very productive and provided an opportunity for residents to provide input and feedback into this critically important issue.
A follow-up meeting will be held at the Doral Resort on Wednesday, April 18th from 6:00 P.M. to 7:30 P.M. in the Oleander Room, where City leaders will discuss the kinds of cuts that are under consideration and provide an opportunity for community residents to provide input and feedback. You do not need to have attended the first meeting to attend this event. A third meeting is scheduled for Tuesday, April 24 from 6:00 P.M. to 7:30 P.M. at James Workman Middle School.
What is the history of the City’s Budget challenges?
On March 29th a letter was sent to the community that laid out much of the background for our budget difficulties. It is posted online at www.cathedralcity.gov and provides a general overview of the current fiscal situation. At our meeting on April 5th, City leaders went into greater detail on these issues. While the issues are complex, we felt the facts were important to detail in this letter as well.
· When Cathedral City incorporated in 1981 a Community Service District (CSD) tax was in place that, by 1999, brought the City about $3.1 million in revenue. In November 1999, a measure to eliminate this tax was put on the ballot by a citizen group. The measure passed and the CSD was eliminated. Had the CSD stayed in place it would have yielded some $50 million or more between 1999 and now. This loss of revenue has been core to the City’s economic challenges since then.
· The Cathedral City Redevelopment Agency (RDA) was founded in 1982. Its role was to remove economic blight and to assemble land and to create other opportunities that could lead to economic development projects that, in turn, would bring more sales tax to the City.
· In 2002 a group of Citizens came together to study the City’s financial situation and eventually asked that a Utility Users Tax (UUT) measure be placed on the ballot, which was not passed by voters. This led to the City cutting its budget by 12.5% -- including letting City parks go brown to save watering costs and closing our Recreation Department. Ultimately, neighborhoods around the parks voted to assess themselves for a portion of the park maintenance and for perimeter landscaping in their neighborhoods.
· A new series of meetings on the City’s budget led citizens to ask that another revenue measure (this time a ¾ percent increase to the sales tax) be put on the ballot in 2006, which also was not approved by voters.
· Since 1982 the RDA addressed blight in the City and obtained and assembled property for development. For example, the RDA spent about $4 million in RDA funds to assemble and prepare the land for the Cathedral City Auto Center which although it is currently affected by the economic downturn, has brought an average of $ 2.9 million a year in tax revenue to the General Fund over the past ten years.
· In 2008 the Cathedral City Citizens Financial Advisory Committee recommended that that a 3% Utility Users Tax (UUT) be placed on the November ballot. The measure was approved with a 67% “Yes” vote. This increase was not intended to solve the City’s core budget problem, but to help support Public Safety services and other vital City services while the economy turned around.
· Shortly after the measure passed, the State legislature took $11.4 million over two years in locally generated RDA funds to help balance the State’s budget. These funds could have been used to stimulate new businesses in our City, create jobs, and generate new sales tax revenue opportunities.
· In 2010 the Citizens Financial Advisory Committee asked that Council place a temporary (5 years) one percent addition to the sales tax (technically known as a transactions and use tax or TUT) on the June ballot. This measure was passed by voters by 56%, but will expire in 2015. This fiscal year the UUT and TUT should bring in over $ 6 million in much needed revenue to support Public Safety and other vital City services.
· In 2011, the State legislature voted to eliminate redevelopment agencies, while offering the ability for Cities to “pay to play” to continue the life of their agencies. In December 2011 the California State Supreme Court delivered a decision that the legislature had the authority to eliminate redevelopment, but it did not have the constitutional ability to implement its “pay to play” option – the result of which eliminated redevelopment agencies throughout California.
· Cathedral City’s redevelopment agency, which had been in business for thirty years helping to stimulate the City’s economy, was effectively shut down on thirty days notice. The result of the elimination of the Cathedral City RDA will be approximately $17 million per year of revenue lost to our community.
· In February 2011 the City conducted a community telephone survey which tested, among other things, the community’s tolerance for another revenue measure. A 7% increase to the UUT or a $250 public safety parcel tax was tested. The revenue enhancements that were tested were at a level that would effectively address the City’s budget issues. Although survey participants were informed that without additional revenue the City would be forced to cut public safety services including closing a fire station, laying off firefighter/PMTs and police positions, the results indicated that the community was not prepared to pay additional taxes at the levels tested at this time.
With this information and the pressing need to bring the City’s budget in line with its existing revenues, I as City Manager, began to develop a plan to balance the City’s budget by cutting $8 million in spending, This reflects a 25% overall reduction in expenditures. We also committed to this series of community meetings to discuss the matter with our residents.
Community questions and comments from the April 5th community meeting
Questions and comments generally fell into three areas:
· A concern that the City is not doing enough to attract and retain existing businesses.
· A concern about “What’s the plan? What is the City planning to do to get out of the current financial problem?”
· A concern about City staff and Council salaries and benefits.
Attracting and Retaining Business
Community Development Director Andy Hall explained how the City is working to attract and retain businesses and that the City has had some successes. However, the economic downturn is still very much in effect, and developers and businesses are still very cautious about opening new businesses. Sales at the Auto Center are up over the last few years, and although not at the level they were before the downturn are trending stronger. There is active interest on the part of a developer in the downtown hotel project. The Community Development Department is working hard to be as business friendly and competitive as possible. Bringing in new businesses support the long-term financial health of the City, but won’t generate the kind of revenue to relieve the City’s current budget challenges.
What’s the Plan?
Unless the City acts immediately to balance the budget it will exhaust its reserves and go into the red in the next fiscal year. Given the immediacy of the budget situation, the first step is for the City to balance its budget by cutting $8 million in expenditures from the general fund.
Currently, about 85% of the City’s general fund revenue goes to support Public Safety. Although the City has worked hard to keep Public Safety as a budget and community priority – given its share of the City’s income, cutting $8 million from the budget is not possible without cuts in public safety.
Staff Salaries and Benefits
All staff salaries are viewable on the City’s website as well as City Council reimbursement. In 2009 the City already laid off staff and achieved concessions through furloughs and salary and benefit reductions of about $3 million. The City is in active negotiations with employee bargaining groups regarding further staff concessions. Although it is too early to report on the outcome of these negotiations, salary and benefit rollbacks are on the table, as are service cuts and staff layoffs.
In closing, although there are some difficult decisions to be made to move the City forward, we cannot forget that Cathedral City is a “can do” community. We are renowned for our resourcefulness, grit and spirit and together we will get through this challenge. Toward that end, we invite your comments and participation at the community meetings while we address how best to face the challenges of the reductions in municipal services that I am recommending.
Please feel free to call me 760-770-0372 or at email@example.com.
Donald E BradleyCity Manager
City of Cathedral City, 68700 Avenida Lalo Guerrero, Cathedral City, CA 92234. Tel: (760) 770-0340