The Morning Report
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Monday, March 26, 2007 | Although Mayor Jerry Sanders has said he would rather cut services than raise money through new fees to replenish San Diego’s deficient budget, the City Council’s financial analyst has urged officials to at least consider generating revenue to bridge the projected $87 million gap for next year.
With less than a month remaining before Sanders reveals his spending proposal for the 2008 fiscal year, Independent Budget Analyst Andrea Tevlin argued in a report last week that the city should review the amount of money it costs to provide municipal services and whether San Diego’s residents, businesses and visitors are paying enough to receive them.
Talking About Fees
More than $30 million in revenue could potentially be raised for next year’s day-to-day budget through fee increases that the Mayor’s Office has already explored, the report states. The IBA says Sanders should consider including the 12 potential fees when releasing an update version of his five-year financial forecast next month.
Whether it’s tacking a surcharge onto car rentals or charging telephone customers for helping fund the 9-1-1 communications system, Tevlin said the city should not ignore any opportunity it has to shore up revenue. Experts have pointed to San Diego’s low-revenue tradition as one of the key symptoms to the cash-strapped government’s financial shortcomings.
“An ongoing dialogue is required to continually monitor and assess possible areas that may be appropriate candidates for new and/or increased revenue opportunities, now and in the future,” Tevlin stated in the report, which the council’s Budget and Finance Committee is expected to discuss Wednesday.
The push to increase revenue has been applauded by some who say the city cannot provide the appropriate level of services and infrastructure without increasing its revenues. The Center on Policy Initiatives, a pro-labor think tank, estimated in 2005 that San Diego could raise an additional $279 million for its general fund annually if it set its taxes and fees at the average level of the state’s 10 largest cities.
But San Diego has continued its characteristic aversion to taxes and fees, as demonstrated by the 2005 election of Mayor Jerry Sanders, who pledged to fill the city’s myriad of financial holes by trimming bureaucracy instead of raising taxes.
Sanders spokesman Fred Sainz said the mayor will continue that philosophy as he tries to surmount a projected $87 million funding gap in the operating budget for 2008 and $794 million over the next five years.
“Before anyone asks San Diegans to pay for increased fees, we need to articulate to San Diegans that the city is well-run,” Sainz said. “The mayor thinks it’s better to look at efficiencies before proposing increases.”
Sanders has proposed laying off close to 1,000 of the city’s nearly 11,000 employees by 2010 to help close the funding gap. But even with the 650 layoffs he has slated for next year, the general fund shortfall would still be about $24 million.
The city’s strained finances result from the big-ticket expenses Sanders says he wants to take on during his mayoralty. His five-year forecast contemplates large payments toward the city’s $1 billion pension deficit, $1.4 billion shortfall for retiree health care, thinned cash reserves, a sapped workers’ compensation fund and infrastructure backlogs.
The city’s past advisers and administrators have before recommended that the city plug its funding gaps with heightened fees, but with little success. In 2002, the Blue Ribbon Committee that former Mayor Dick Murphy commissioned advised the city to explore new revenue streams. Past city managers pitched fee packages with scant success, and two propositions to increase the hotel tax levied on visitors were both shot down by voters in 2004.
Last August, the Kroll Inc. consultants called again for the city to expand its revenue base in addition to the streamlining heralded by Sanders. The suggestion was one of the very few by Kroll that Sanders has not embraced.
“Those were really start-stop attempts,” said Penne Takade, the IBA’s deputy director. “We want to look at the situation comprehensively. Knowing more about the city’s fees and cost recovery can only help.”
The report suggests further examining some of the opportunities the Mayor’s Office shared with the IBA. (Sainz said no public reports about mayoral discussions of revenue opportunities exist.)
For instance, the city could examine whether telephone customers in the city should be charged $3 per month to help fund the 9-1-1 communications system. The idea, which has been implemented in other cities, would require some legal analysis of whether the government or voters would have to authorize it, but it has the potential to raise about $16 million annually, the report said.
Other ideas include charging for car rentals ($3 million a year), paramedic service ($2.1 million), replacement of old trash collection barrels ($4 million), and boat launches for nonresidents at city piers ($300,000).
The IBA also noted the potential of passing the administrative costs of the city’s parking meter card ($80,000) and business-improvement district ($190,000) programs to users. Also, the report suggested considering a surcharge on tickets to events at city facilities ($4.9 million), increasing the city’s storm drain fees (an undetermined amount), charging private valet companies for setting up business on city streets ($220,000), better chasing fees that are past due from delinquent businesses (undetermined). Lastly, the report said the city should examine all the services it provides to see whether they are being paid for fairly by users.
Jay Goldstone, Sanders’ top financial aide, said that despite the IBA’s suggestions, the mayor will not rely on new fees. “I will assure you that when the ’08 budget is done and presented, it will be balanced and not turn to fees.”
Lani Lutar, president of the San Diego County Taxpayers Association, said she admired the mayor’s stance against new fees, but said that her group has not yet been satisfied that cost-cutting will take place. “I think taxpayers expect real reform to happen before they’re open to any real significant increase in fees and taxes, and we have not seen that real reform happen,” she said.
Wednesday’s meeting of the Budget and Finance Committee will be held at 9 a.m. on the 12th Floor of 202 C St.
(Correction: The original version of this story quoted Fred Sainz as saying new public reports about revenue opportunities exist. It should have said that no public reports exist.)