Roundtable: North County Cities Deal With Budget Woes
Editor's note: During our broadcast, we incorrectly identified Kelly Davis as "assistant editor for San Diego CityBeat." Kelly's correct title is "associate editor for San Diego CityBeat." We apologize for the error.
Friday, June 10, 2011
We hear so much about the City of San Diego's budget because it's five times bigger than the next largest city in San Diego County. So let's get some perspective on how different cities are coping with cuts.
We hear so much about the City of San Diego's budget. It is the gorilla in the room, five times bigger than the next largest city in San Diego County. But let's face it, fewer than half the people in San Diego County live in that city, and there are 17 other cities in the region.
So let's get some perspective on how different cities are coping with cuts
Guests: Craig Gustafson, reporter, San Diego Union Tribune
Kelly Davis, associate editor, San Diego CityBeat
David Garrick, reporter, North County Times
ST. JOHN: And you're back on KPBS round table on Midday Edition with me, Alison St. John and with us at the Roundtable today, we have Craig Gustafson From the UT, Kelly Davis from City Beat, and David Garrick from the North County Times. So we hear so much about the City of San Diego's budget and admittedly San Diego is the gorilla in the room. It's five times bigger than the next largest city in the county. But let's face it, fewer than half the people in the county riff in the City of San Diego, and there are 17 other cities in the region. So we're gonna talk a little bit about some of the cities in North County now. And David, you've written an article with an over view of why some North County cities are struggling more and others less. And why some residents have to lose their libraries and others don't. Maybe you're a North County residents listening and you'd like to join the round table. Perhaps you have some questions or some comments to make about how your city is balancing their budget. Our number here at the round table is 1-888-895-5727. And we'd love to hear from you.
So David, which of the cities in North County that are having the toughest time of it right now?
GARRICK: Escondido and Oceanside by a wide margin. I think it boils down to them not having a strong diversity of revenue. You know, they don't have tourism. San Diego has a wide way of getting revenue. And Escondido and Oceanside, they don't have strong hotel markets. Other cities are much more clever. Carlsbad and San Marcos in North County, San Marcos gets quite a bit of money from leasing buildings, and Carlsbad has 13 million a year from tourism. Where's the other cities have two million at the most. Those are the differences. It's different with San Diego, it's all one big enchilada, so it all comes together. And North County cities, some are on the coast, some are inland, very different dynamics.
ST. JOHN: Two of the most important sources of revenue are property taxes and sales taxes. Which of the cities that are really suffering from sales taxes going down?
GARRICK: That would be Carlsbad and Escondido. But Carlsbad hasn't -- Carlsbad residents are facing very few cuts because they have such a diverse revenue stream. Escondido has probably faced the most cuts of any of the cities in North County. They've struggled in numerous areas. Although one thing is interesting, I wonder if there was waste in the budget, because despite revenue going down 10 million a year, and pension costs going up 15 million a year, that's a 25 million dollar gap in an 86 million dollar building, there still hasn't been the kind of closures you might expect. They're partially closed one library branch. There was discussion of closing city parks, city pools, none of it ever gets closed. It's kind of a sky is falling, we may have to close everything, and then like Craig was say other, I that find a way to save it all in the end.
CAVANAUGH: It's a familiar sort of theme, isn't it? And the thing about Escondido is they have this arts center, which is losing them a lot of money, and somehow that hasn't been closed either.
GARRICK: No, but that's been pared back dramatically. If you're a big arts center fan, the amount of free events is less, the amount of performances is less. They've definitely scaled that back. There's definitely some things you would notice would change, but it's not something shutting down completely. It's just fewer hours. City Hall is now closed every Friday. I believe it's the only City Hall in the county where City Hall is closed every single Friday. Some cities close every other Friday. They have slashed out library hours, 32s definitely been some cuts but there's not been anything that completely closed.
CAVANAUGH: That's an interesting point. If you're a resident of North County, you try to call city hall on a Friday, you probably won't get much luck, right?
ST. JOHN: Whereas the City of San Diego, you still get service all week right?
GUSTAFSON: Yeah, they do.
GARRICK: I would say the area probably most hit is recreation programs as well. The city sort of have this axiom police, fire, and public works are the three things you don't touch. Those are the thing last things you're supposed to touch. And public works like street maintenance and those kinds of things. So that leaves parks and libraries and recreation vulnerable accident because police and fire make up about two thirds of the billions for most North County cities.
ST. JOHN: So Oceanside has just cut library hours right?
GARRICK: That's correct.
ST. JOHN: So it's interesting because, you know, the mayor said he was gonna be -- of San Diego said he was gonna cut library hours and there was outrage. But what happened in Oceanside?
GARRICK: They've cut the hours, I think they cut them less than initially. It's always you're gonna say it's gonna be worse than it is. But Oceanside is probably in worse shape than Escondido now. It appears. I think Escondido was in worse shape when the sales tack went down, but now sales tax particularly fueled by car sales has gone back up. So it seems that Oceanside may be facing the biggest challenges.
ST. JOHN: It's interesting that the property tax, that the cities get different shares of property tax. I don't think a lot of us realize that this is quite a big difference between how some cities get a bigger share of their property tax back from the state.
GARRICK: I was shocked when I learned about it. Of it's based on an archaic formula that came into play in 1778 when problem 13 was passed.
CAVANAUGH: Tell us what you learned. What shocked you?
GARRICK: It shocked me that San Marcos gets seven percent of the property tax of their city, and other cities like Carlsbad and Poway get in the twenties, 28, 22 percent. So that's four times as much. Just of the property tax earned am Carlsbad is already in a better position than Escondido because the houses are worth more, and they have higher property values butch it's not just that. They also get a greater share of every property tax dollar. Four times as much as San Marcos.
ST. JOHN: Carlsbad does.
GARRICK: Carlsbad does. So it makes a huge difference. And it's really based on -- there's nothing fair about it. It's based on a formula that was created in 1978 when they rolled back property taxes. I couldn't even really explain it to you 'cause there was 8,000 factors in it. But it had to do with trying to be fair to cities that were doing well at the time, and they put the formula into place and probably didn't look as forward as they should have about what kind of impacts it might have when the suburbs started to grow over time.
ST. JOHN: I know the County I think gets, like, 11 percent back. But do you know how much the city gets back?
GUSTAFSON: I don't know it off the top of my head, but for some reason, 18 percent sounds right.
GARRICK: Which is about the average. I think 17 percent is the average.
ST. JOHN: Isn't that interesting. We just heard recently that some school districts get different amounts of tax money back. And that that's something that should have been corrected. But here we have cities all getting a different share back. And nobody seems to be calling for a correction. Kelly?
DAVIS: And is that a formula that's locked in? Could it be amended?
GARRICK: It could be amended but it's a zero sum game. If some cities want more, then other cities would have to take less. So any time the cities that got less say we'd like more, you've got cities like Beverly hills and cities in Marin county come out and go, that's not going to happen. So the problem is that property tax -- the property tax pot isn't going to grow. So if someone gets a greater share, someone has to get a lesser share. So it's very difficult in the legislature to get anything like that going. I know Poway unified tried a while ago, because they're one of the cool districts on the short end of the stick to try to shift it around. Typically, it's suburban districts, because when the formula was put in place, they didn't have high paid teachers or any money, and then all of a sudden thew grew and got high paid, and so they get a smaller share. And when they tried to do it, a lot of backlash.
CAVANAUGH: Maybe you're a North County resident, and you've got some opinions or thoughts about all this. Or insights. 1-888-895-5727 is the number to call. To join the round table here. And Craig, you have a point you want to make.
GUSTAFSON: I used to cover Escondido when I first started at the Union Tribune, and I know David was talking about diversity of revenue. And that is key. But for a city like Escondido, they've struggled with that. They've built the arts center that has been a assistant drain on their budget, and they've tried to build a hotel right next to city hall for the past seven years. It started back when I was covering them in 2004. And it did, the project's now dead. So they have been trying to diversify their revenue and have not been very successful.
ST. JOHN: Whereas I learned from are why article, David, that Encinitas is getting a huge percentage of its property tax back. It made me wonder is that maybe one reason why Encinitas is one of only two cities in the whole county that doesn't have a redevelopment agency?
GARRICK: I'm not sure of their reasoning on that, not having a redevelopment agency. But they can certainly get on without one based on your property tax revenue. The cities along the coast have a huge advantage as far as diversity of revenue because their sales and tax and property tax, which we mentioned, everybody gets those. The other kind of revenue you're talking about is leasing revenue from buildings, and it's mostly tourism, hotel taxes. And if you're on the coast, it's a lot easier to have hotels than if you're inland. There's no real reason to stay inland relative to the coast.
ST. JOHN: I'd like to take a call here just to include some of our listeners. And we're hearing from Armin in the San Carlos area. Thanks for joining the round tail. Go ahead.
NEW SPEAKER: Hi, how you guys doing? Thanks for having me.
ST. JOHN: Good. What's your story this morning?
NEW SPEAKER: My story is I live in San Diego, and the community of San Carlos, and it's a great community, we've got great schools, but our library is definitely falling apart. And there is a new site for the library, and when you drive by the site, you see a poster and a board pinned out front, and unfortunately this poster and board has probably been there for so long that it's rotting away. And you can't see the image anymore. Is there some sort of task force or is there some sort of list about these projects throughout the city that have been either put on hold or when are they gonna eventually get started? Are the taxpayers being notified of these port of projects that are kind of in limbo?
ST. JOHN: That's a good question for Craig here.
GUSTAFSON: The city, I haven't seen a specific list that they order. But I know the mayor has proposed in this latest budget a hundred million dollars for capital and deferred maintenance projects. And so he wants to do a hundred million every year. I don't know where that San Carlos library would fall on that list, but there is money being poured into this in the new budget. And so potentially the project could start happening.
ST. JOHN: David?
GARRICK: I think an interesting point to make is during this time that cities are struggling to balance their operating budgets that they may be giving short shrift to their capital improvement budgets. And I think that's something we should watch for, and maybe fiver years form now, we might be writing stories about remember during the great recession of 2008 through 2011, the cities all didn't take care of their deferred maintenance and didn't take care of their buildings and they're crumbling now. I'm not saying that will happen. But I think it's something to look at.
CAVANAUGH: Okay. Good, this issue about how people spend their redevelopment money, I know you had mentioned in your article that some cities are really doing well because of the way they chose to spend their redevelopment money. How does that work?
GARRICK: Well, the idea is that you can spend it on city hall, you could spend it on a library, and that sounds like a great idea, but then you have to continue throwing money at it and pay people to operate it. Whereas if you can spend your redevelopment money on an economic development project like a hotel that generates property -- or hotel taxes and property taxes, or a big mall, then you're going to -- it's gonna be the gift that keeps on giving to you. Whereas when you spend it on a City Hall or a library, you don't get that language term revenue gain. Escondido is a perfect example. In 1984, they created a redevelopment district to create an arts center. They thought it would change the city's image, maybe make it the Pasadena of San Diego County. It's inland so it didn't have as much appeal as a coastal city. They thought it would be a great idea. But if they have followed a city like San Marcos that built a lot of plazas.
CAVANAUGH: Commercial retail plazas.
GARRICK: Right, and also they put an extra freeway onramp on -- a great example, San Marcos, they spent a lot of money on a freeway off-ramp, the Las Posas exit off of highway 78. You couldn't think that's a great project, but it increased the value of the land so much nearby because businesses want to be next to a freeway. It spurred a whole bunch of development near that that dramatically increased their property tax and sales tax. So that's a way you can spend redevelopment to help your over all operating budget. When you build an arts center, and it costs you four or five million dollars a year to operate it and it doesn't generate any revenue, you spend your redevelopment in a way that might help the city be a more appealing place, but it doesn't help your bottom line.
ST. JOHN: And do you think the plans that we really don't know much about them anymore, but the plans to build a baseball park?
GARRICK: The City Council has given direction that they would like the city to do that, and pay for it with redevelopment money. Redevelopment money is in jeopardy. In Sacramento there's a new bill every day, a compromise bill that would do this. One compromise bill said, we'll allow redevelopment to survive but you can't build sports parks.
CAVANAUGH: Do you think that is just another pie in the sky dream for Escondido?
GARRICK: I really believe the ballpark would have happened if redevelopment hadn't been threatened by the governor in January when he announced his first budget. Everything seemed to be -- all the pieces were falling in place. Jeff Murad the owner of the Padres seemed really excited about having a minor league team within his sphere of influence, only 25 miles north.
ST. JOHN: 1-888-895-5727 is the number to join our journalists at the round table here. We have John from Tierra Santa on the line. Thanks so much for joining us, John. Go ahead.
NEW SPEAKER: Yes, I was curious how come no one ever talks about the Serrano priest ruling, in 1971 with regards to sharing the tax revenue.
CAVANAUGH: Okay, David is nodding.
GARRICK: I didn't use it from before because anyone I didn't know would know the name. Serrano versus Priest in '71 is what set that school district funding into place that hurts Poway Unified and helps other districts that were in wealthy areas at the time.
ST. JOHN: So John, that's a good point. Did you have something that you wanted to mention about that?
NEW SPEAKER: Yeah. It seems that a lot of people keep asking about taking money from these other school districts like you mentioned from Poway to these other districts, what ended up happening is that everybody's revenue over all went down. And since that time period, our schools have been on a downward spiral. So I'm wondering if that is anything that they're gonna address instead of just talking about proposition 13 all the time.
ST. JOHN: Good question. David?
GARRICK: I think most people will tell you the answer would be that proposition 13 is what dramatically decreased the funding for schools and that you have to talk about making some modifications to that if you want the schools to go back to what they were before 1978. I don't think there are any other magic bullets other than some other sort of tax increase. It takes money to run schools.
ST. JOHN: So let's just talk about pensions from time to time, before we run out of time here because that's obviously a bit of a big stone in the shoe are if every city is that the pensions are going up. And your article actually analyzed which city had a bigger percentage of its operating budget committed to paying its pension fund. What did you find out?
GARRICK: I found out that Escondido and Oceanside were in the worst shape in that. And you can ask 20 different people and get 20 different opinions. I don't think they mismanaged their pensions, I think it's because they're older cities and they have been around for longer. And I think that increases the number of older workers, but I also think the key element is that they have their own police departments. Whereas the other six cities in North County contract with the County Sheriff's. So Oceanside Carlsbad and Escondido have their own police departments, which dramatically impacts their pension system. When things are good, when they have their so called pension holidays, when the stock market was doing quite well, and the PERS system had a lot of money, they actually were better off than some of the other cities. But now that there are no pension holidays, they're worse off. Carlsbad, again, they do well because they have that diversity of revenue. Their pension problem is bad, and they're able to deal with it better because they have so many diverse revenues because Oceanside and Escondido don't.
ST. JOHN: I hate to divert from pensions for just a minute, but for Carlsbad, they are paying for a golf course, which is their -- some people might say pie in the sky thing. How are they going to afford a golf course which is actually losing money, a bit like Escondido's art center?
GARRICK: Right, again, I'll say on their behalf, they believe long-term that it will make money. But right now, it's definitely losing money. 13 million dollars a year in hotel receive new, and I really -- that's pretty much it. That's a huge number, and you can argue that the golf course is an amenity that makes people more inclined to stay in their hotels. I'm not sure. But they're one of the few cities that could afford a boondoggle like that, I have to say.
ST. JOHN: So with pensions and I know Carlsbad has taken some of the most tough action in pensions in North County.
GARRICK: Solana Beach and Carlsbad for sure. They took the lead. Solana Beach has got a second tier for all new employees already, and Carl bad has done it for most of the employee groups, not all. And they were the first domino, everyone thought. Every cities haven't fallen as quickly or as completely as people suspected. And as Craig mentioned, existing pensions, legally, their pensions legally can't be adjusted. But it's new hires that will get a lower pension benefit.
ST. JOHN: And it's so interesting because we're all talking about jobs, creating jobs, creating good jobs, and yet with all this move to end guaranteed pensions for city workers, some of the good jobs that he arin main our society are now being dismantled.
GARRICK: Right, well, a lot of people have said that instead of citizens complaining that public sector workers get such generous pensions when they don't, they should say, give it to me, not take it away from them.
ST. JOHN: Yeah, if only someone could figure out how to do that. But do you think that the City of San Diego is paying more of its operating budget to pensions than cities in North County? Or do you know Craig, what percentage of the operating billion?
GUSTAFSON: Yeah, of the operating bottom, it's about one point one billion, and about 180-million of that goes to the annual pension payment.
GARRICK: It's in the neighborhood. Escondido is paying 17 million out of 74. So I can't do the math. But it's in the neighborhood.
CAVANAUGH: So we always point to San Diego as having such terrible perception deficit. But it appears that it's actually not out of line with many other cities at this point. ?
GUSTAFSON: Well, I think people would argue though that -- people that are against public employee pensions would argue that the benefits are quite generous as far as the multiplier that you get and the percentage of your salary that you will get when you retire, and San Diego pretty much has all the goodies, the drop program, purchase of service credits, thirteenth check, I mean there's a lot of programs that the City of San Diego has that other people don't have.
ST. JOHN: Okay, but when you look at in terms of the city having to balance its budget with the pension obligation that it has, the City of San Diego failed to pay into its pension fund for several years, which is why it was one of the first cities in the county to actually really face a crisis. But it seems interesting at this point that it's perhaps managed to ratchet itself back to a situation where about the same percentage of its operating budget is going into pensions as many other cities who don't have their own pension plans, what do it through CALPERS. Kelly.
DAVIS: And the fact that it's, you know, you're seeing about the same percentage could speak to the effect of the stock market on pensions and reforms have been made, but now it's maybe just waiting to see if the stock market bouncing ba.
GARRICK: Just a point, I think Oceanside and Escondido are the same percent, San Diego I believe San Marcos and Encinitas and some of the other cities are about 10†percent. So I think it's bigger cities with -- Oceanside and Escondido are full service cities where thirds requirement own sewer and water, those are larger cities. I would goes that Chula Vista, Oceanside, Escondido, and San Diego are probably more similar in pensions than any of the other smaller cities.
ST. JOHN: Interesting, okay, well, it something is something to think about. Where you live depends a bit on whether your services are likely to be at risk in the cuts coming down the line or not, and how cities make those decisions. Coming up, state senator Juan Vargas has been making waves since he narrowly defeated Mary Salas at the polls, and he recently helped kill a bill that could have helped struggling families to avoid foreclosures. We'll find out what's going on here. Coming up here on KPBS round table.
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