Friday, February 27, 2009
The quality of life in your neighborhood has a lot to do with the fiscal health of the city you live in. There are 18 cities in San Diego County and all of them are being hit by the economic downturn. KPBS reporter Alison St John has more on where cities get their money from, and how their revenues are dropping.
Let’s start with some good news. At a time when many cities are cutting back on construction projects and even routine maintenance, the City of Vista is building a new city hall. Heavy equipment is at work next to the old civic center. Robin Putnam, is the project director,
Putnam: " What we’re in now is an old school that was condemned. In June of 2010 there’ll be a whole new city hall ready to be moved into."
Putnam says the reason Vista can afford a new city hall is because people voted for a half cent sales tax increase two years ago. That money meant the city could build 2 new fire stations, as well as the new civic center.
Sales tax now makes up 30 per cent of the money for Vista’s General Fund , and it is the largest source of revenue for seven of the region’s 18 cities.
No one relies on it more than National City, where more than half of their General Fund relies on sales, and especially on car sales.
St John : " I’m standing here on the Mile of Cars in National City and there are plenty of cars going by, but the cars in the lots are not going anywhere fast."
Najib Ahrari a manager with Frank Toyota
Ahari : "Right now we have a ton of incentives… low APR, cheaper vehicles.. on most of Toyotas, they are offering you rebates."
Ahari puts a positive spin on the plummeting sales figures, but there are no customers visible on the car lot. The auto dealer’s troubles mean trouble for National City too. It had counted on the Mile of Cars to generate more than $4 million to pay for basic services like police and fire.
The City of San Diego, which is twenty times bigger than National City, relies on sales tax for only a fifth of its General Fund, but Chief Financial Officer Mary Lewis says she’s worried.
Lewis : "Sales tax, at this point, is the biggest unknown because we haven’t seen yet the data from the forth quarter of 2008, from that important holiday season."
In other words, the falling sales tax revenues don’t even take into account low Christmas sales yet.
San Diego, and half the cities in the county, actually rely on a different source of income - property taxes - for the largest share of their General Fund. This is hardly reassuring at a time when property values are tumbling. And Acting County Assessor Dave Butler, says the full impact of lower property values hasn’t hit the region yet.
Butler : "Last year, which was the first year that we saw the big downturn, we only saw one city - San Marcos - that had very slight negative growth, less than one pre cent negative. Next year is where everyone is worried."
All the cities are waiting on tenterhooks for June when they will find out how property values have actually dropped.
The third biggest source of income for cities, tourist taxes, is also falling .
Coronado is the city with the biggest stake in tourist taxes: tourism at hotels, including the Hotel Del, accounts for a quarter of the city’s General Fund. Leslie Suelter, Coronado’s Finance Director, says TOT has dropped 5 per cent so far since last year, but.....
Suelter: "It’s early yet and for the rest of this year, based on conversations with hotel operators here in town, I anticipate we’ll see declines compared to last year of between 15 and 20%."
With all the major sources of income dropping, what’s a city to do? Keeping basic services like police, parks and libraries open is not getting any cheaper. Can it do what a person who loses a job might do: borrow off a credit card ?
Michael Coleman is a specialist in municipal finance for the California League of Cities.
Coleman : “The Federal budget can borrow without having to balance its budgets, but local government cannot do that, cannot finance operations with debt”
So does that mean that without new sources of income, major cuts are ahead?
Coleman : "Yes it does ! The reserves can help cushion that transition but the economic downturn that we are facing right now, and the implication for cities and counties, is not a short term thing that can be managed solely with reserves or one time fixes."
Cities are already struggling to balance their budgets this year. But this economic downturn will have a delayed effect on city revenues. That, combined with increasing labor costs, means many of our hometowns are bracing, knowing the full impact won’t hit them till 2010.
Alison St John, KPBS news.