For readers who protest “I was told there would be no math!” be warned that the following contains lots of math. Unlike my days in high school I’m not going to show my work. If my numbers are off, well that’s what corrections are for.
Escondido city staff presented a 2022-2023 budget report and hearing June 8 with stark choices. Some were kicked down the road for a future day after the council indicated it would take about $5 million from unspent federal American Rescue Plan Act (ARPA) funds to—among other things—prevent the California Center for the Arts budget from being gutted.
Unlike this writer, they showed their work!
The fire department and the police department were exempt from cuts this year—but just about everything else was subjected to down-to-the-bone cuts of the scalpel.
Haunting the proceedings like Banquo’s ghost was the proposal for raising revenues by a sales tax increase of ¼ cent, ½ cent or one cent. And the knowledge that if the public ever passes such a tax, tortuous budget sessions like these would be banished for a few years.
The public weighed in with letters and at the podium. Many of them encouraged the city to inhale—pot revenues that is—by legalizing the sale and taxation of cannabis within city limits. The Queen Califia’s Magical Circle sculpture in Kit Carson Park, the treasure bequeathed to the city by its creator, the late artist Niki de Saint Phalle, had many advocates and defenders speaking of its value to tourism and art appreciation in general. A few also endorsed the sales tax idea.
The budget presentation was made by Christina Holmes, director of finance. She noted the increase of sales tax revenue (by 8%) over last year and 5% increase of property taxes, to give the city a total operating revenue of $118,257,230.
The staff proposed expenditures of $128,520,810 that included General Government Services, $7.1 million; Public Works, $13.5 million; Police, $53.258 million; Fire, $31.290 million and California Center for Arts, Escondido, $2.7 million.
Health and safety make up 75% of the expenditures.
The difference between necessary expenditures and revenues, i.e. the deficit, is $8.5 million.
The rest of the session was devoted to turning that deficit into a balanced budget by detailing ways to cut back.
Holmes explained that staff projects taxation revenues will continue to grow, although inflation is rising faster than the economy, which must be factored into the calculations. Staff’s conservative estimate is 7% more tax revenue next year. Actual receipts exceed the current projected revenues. So $1 million was added to the projected revenues for 2022-23, she said.
This allowed the revised estimate of revenues to be $122 million.
Holmes explained that Escondido has been replacing vehicles piecemeal and the fleet replacement fund has been underfunded. This year’s budget includes extra monies to stabilize that. Reserve funds will be used to replace 20 police cars, four police motorcycles, 11 trucks and five other pieces of equipment past their useful life.
After these adjustments were made to the numbers, the updated General Fund deficit was $4.8 million.
The city’s three deputy city managers detailed how each department would make cuts that would total $1 million in savings.
Development Services Department will save $100,000 through maintaining vacancies of one planner, one development technician, one engineer and one specialist, through October 1.
Deputy City Manager Chris McKinney, who is in charge of Utilities, Development Services, Planning, Building, Engineering and Code Enforcement, said the vacancies would “impact service levels, depending on which position isn’t filled.” It will increase the length of processing permits and inspections. “It will make it hard to comply with [California’s] Permit Streaming Act.”
Deputy City Manager Joanna Axelrod, whose Department of Community Services, includes the Library, Digital Media Services, Older Adult Services, Recreation and Senior Nutrition, is responsible for “community enrichment.” Her department has committed to cutting $215,000, to be shouldered mostly by Recreation. It would fall largely on 93 temporary part-time positions that are mostly active during summer, when the department is its busiest.
Deputy City Manager Rob Van De Hey oversees Human Relations, Finance, Public Works, Information Systems, Housing and Neighborhood Services and with addressing homelessness. He saved $395,000 though cuts to information systems, HR, finance and Public Works, which will not fill two vacancies of a purchasing manager and grant writer. HR will save $60,000 through not filling a vacancy and through unexpended maintenance and operations funding.
Van De Hey said the HR Department has a 14% turnover rate. “They are leaving for higher pay,” he said.
Fire Chief Rick Vogt and Police Chief Ed Varso, both spared budgetary cuts, said both departments are still operating under the stress of unfilled vacancies that lead to more overtime.
Other proposed cuts included reducing the budget of the California Center for the Arts, Escondido by $1.93 million. This would come from the management fees, utilities and direct maintenance costs.
The staff achieved other economies by deleting roof repairs for city buildings and planning department contracts.
All the economies reduced the operating budget to $122,038,930.
Holmes explained that the Pension Trust Fund currently has $25,840,638. This was used last year to close the deficit, but due to increased operating revenues might not need to be tapped this year.
In addition, the City was allocated $38,808,509 by the American Rescue Act (ARPA) which must be spent by the end of 2026.
Of that about $10 million remains unspent. This can be used for “general government services” It can’t be used for the pension funds.
The council heard many comments from the public, including many positive pitches for Queen Califia’s Magical Circle and a dozen or more arguing for legalized cannabis sales.
Former Mayor Lori Holt Pfeiler, who is CEO of the Building Industry Association, said cutting Development Services would hurt the city’s competitiveness and “make housing more expensive.”
Ed Wicker, of the Wicker Law Group, spoke in favor of cannabis business as a source of city revenue.
Another speaker said eliminating the city’s support for the Arts Center “would put the center in an untenable position.”
City Treasurer Doug Schultz warned that optimistic projections of sales tax revenue, “might be wrong.”
A representative of the Escondido City Employees’ Association, warned that COVID increased the work load for staff and that many departments are short-staffed. For instance, he said, there is one building inspector.
Councilmembers weighed in at the end.
Joe Garcia said he too is a fan of Queen Califia, calling it “a very important asst.” He warned that deferring replacement of vehicles, “will eventually become unsustainable.” Even mentioning closing the library, which staff mentioned but said was rejected, “puts chills down my spine.” He was also concerned about cutting so much from the Center’s budget. “What I would like to see is that we support the Center with additional funding, from ARPA,” he said.
Councilmember Consuelo Martinez praised the staff. “I see how much they work. We do a lot with a little. The city of Escondido is very frugal. I’m not a fan of cutting funds to the arts. They are going through a transition. I feel this huge cut would set them up for failure.” She is not a fan of “deferred maintenance and kicking the can down the road.” She predicted that putting off roof repairs, “will cost us a lot later.”
Replying to the many advocates of the cannabis business model, she said, “This is something that would definitely contribute to our economy. I do hear you but this is something this council has said no to, and elections matter.” She concluded, “We really need to let the people of Escondido consider a sales tax matter.”
Councilmember Mike Morasco said, “This is an easy one. Instead of having this conversation on minutia, let us recommend using ARPA money. Use $4.8 million and let staff decide where to utilize it.”
Councilmember Tina Inscoe agreed: “We have the opportunity to use these one-time funds. I don’t want to deteriorate development services. The Center is in a huge transition. To cut them off at this point would be really untenable.” She agreed with backfilling the budget with ARPA funds.
Mayor Paul McNamara said, “You put together a balanced budget and it shows all the pain points. You didn’t cut fat because there isn’t much fat. We’re reducing the capacity of the city. Business is what keeps the city going, and we need to increase business.” He said the results of a community survey are due soon and “we will see what this community is willing to bear. Based on that survey the five of us are going to decide whether to put a proposal on the ballot.”
He noted they could use as much as $7.2 million in ARPA funds this year to pay off the deficit. “We are going to live with whatever the citizens decide to,” he said. “And then find out what the city is willing to bear. . .We’ve got a great momentum going, let’s fund it and then go forward and find out what people are willing to pay.”
McNamara supports legalized cannabis in city limits. “We should still explore and see if the monies promised are there or not because of costs for public service,” he said.
He proposed that $5 million from ARPA money be released to address the deficit and that staff return at the next meeting to show how that would affect the number on the budget. That was approved unanimously.