City of Stockton Fiscal Analysis of Stockton Safe Streets Sales Tax Initiative Dated March 22, Stockton City Council April 2, 2013

Transcription

1 City of Stockton Fiscal Analysis of Stockton Safe Streets Sales Tax Initiative Dated March 22, 2013 Stockton City Council April 2,

2 Overview City needs additional resources for achieving fiscal and service sustainability for needed investments in Police Department Marshall Plan Proposed Initiative Half cent sales tax Special tax, 2/3rds vote Expires Dec 31, 2025 $18M revenue Half for new officers Detailed restrictions Off limits to creditors; poison pill 2

3 Two Fundamental Flaws 1. Special tax does not address underlying General Fund (GF) deficits Special taxes only work when GF is already stable and balanced, allowing new restricted funds to expand selected services 2. Requirement that GF not only maintain, but significantly expand, its own funding of police officers Cannot add officers with special tax without also adding officers with money GF does not have Increased cost significantly worsens GF shortfall, requiring higher cuts or additional new taxes 3

4 1. Deficits Updated Forecast Pre Chapter 9 Revised baseline revenue/expense over same term as special tax Includes fiscal stabilization expense (ISF, maintenance, COLAs) Includes mission critical expense Property sales & efficiencies included 4

5 1. Deficits Chapter 9 Restructuring/ Pendency Plan Still Leaves GF Short Savings from: Revised labor MOUs Elimination of retiree medical AB 506 Ask level of savings from debt creditors Not investing in organization (no maintenance, ISF, COLAs) Balancing requires new tax revenue or added budget cuts 5

6 1. Deficits Initiative Makes Difficult Situation Worse Assumes full Chap 9 savings $13M deficit in FY Shortfall grows back to surpass pre Chap 9 levels by FY Requires even greater new tax revenue or added budget cuts to balance 6

7 2. Added GF Costs Initiative Imposes Major New Costs on General Fund Not a normal maintenance of current effort Initiative continually raises the bar City must maintain growing level of baseline positions (sworn police) from other than special tax funds Otherwise special tax cannot be spent for additional new officers; $9M (50% of tax revenue) would accumulate unused in special tax Reserve Fund Option within first 3 years to contract with Sheriff Requires Council and Board of Supervisors approval, at the recommendation of the Tax Advocate Administrator, Police Chief and Stockton Police Officers Association 7

8 2. Added GF Costs Baseline Positions Requirement Starts at 344 (current budget is 342) Short term grants do not count toward meeting total Amount increases proportionate to revenue growth since FY After five years, GF must absorb cost of five special tax positions annually additional sworn staff costs GF $161 Million through FY

9 2. Added GF Costs Tax Does Not Cover All Costs Officer cost paid by tax limited to $76,000 base salary (2% growth) plus selected benefits Does not cover: overtime add on pays vehicle, equipment, non personnel cost higher cost of supervisory staff non sworn staff to support new officers *This is minimum amount; General Fund may pay more to extent lateral hires increase average starting pay and benefits are not covered by special tax. * 9

10 2. Added GF Costs Summary of Added Burden Total Sworn Positions Added Through Term of Special Tax Short at Start 2 GF Revenue Growth 120 Shift from Special Tax 40 GF Added 69% 162 Special Tax Added 112 Shift to GF 40 Net Special Tax* 31% 72 Gross Positions Added 234 *Net amount that can be added without overdrawing special tax before end of term; peak of 100, declines in later years to 72 10

11 Consequences of Meeting Positions Requirement Adds police (in theory), but lose everything else Absent cuts, requires additional tax increases to close existing GF deficits and pay for added GF police costs GENERAL FUND DEFICIT ($ in Mil.) Existing Deficit ( ) $ (186) Added by Initiative $ (241) Total Deficit Over 12 Years $ (427) Deficit Starts in: FY REQUIRED BUDGET CUTS (in $) $36M/yr Opt A Opt B Opt C Police 23% 0% 0% Fire 23% 48% 0% Other 23% 48% 93% Annual shortfall starts at $13M in FY 14 15, climbs to $58M in FY 25 26; average is $36M Realistically, cuts would be made in stages rather than all at once 11

12 Consequences of Not Meeting Positions Requirement Political repercussions from not achieving goals, residents paying tax but not getting service Not using resources available; funds are stockpiled in special tax Reserve Fund where they can t be spent ($ in Millions through FY 25 26) Initiative Fully Implemented Baseline Positions Level Not Met Use of Funds GenFund SpcTax GenFund SpcTax New FT Officers $241 $160 New PT Officers Retention/Lateral Pay 3 2 Admin/Consultant/Audit 3 3 San Joaquin County Anti Crime/Organizations Police Residency Pay 13 9 Reserve Fund Totals Share of Total Cost 48% 52% 0% 100% 12

13 Other Issues Policy issues on use of funds (see Mgt Partners report) Labor/practical issues of using part time officers Subsidizing County costs for detention, prosecution, incarceration of misdemeanor/non violent felony offenders Major obligation of creating a City Jail Retention/longevity pay, lateral officer signing bonuses, residency incentive pay Powers of Tax Advocate Administrator & organizational accountability issues (see City Mgr memo) Legal concerns regarding bankruptcy (Marc Levinson) Funding for Marshall Plan (David Bennett) 13

14 Recap of Fiscal Issues Special tax does not work when GF is not already stable and balanced Cannot build up police service on crumbling foundation Initiative requires massive added budget cuts if fully implemented (or additional new taxes) Only practical alternative is not to meet baseline positions requirement, which means no added police officers Initiative fails these key tests Timing and structure not appropriate to Chapter 9 process Not capable of eliminating GF shortfalls Tax rate not sufficient to provide a sustainable budget Doesn t meet community priorities for improved public safety 14