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Thursday, March 29, 2007 | Several City Council members suggested the city needs new taxes and fees in order to stand on more stable financial ground Wednesday, claiming the government’s shortfalls result from not charging enough for the services it provides.
“At end of the day I know why we have these problems,” Councilman Jim Madaffer said, “it’s because the city of San Diego has an underfunding problem.”
Three of the four council members at the Budget and Finance Committee meeting Wednesday said they doubted whether the city can afford to accept Mayor Jerry Sanders’ plan to bridge the city’s $87 million budget gap next year with service cuts alone.
The meeting featured the proposal by Andrea Tevlin, the council’s independent budget analyst, to consider new fees in order to raise more than $30 million. Some of the income streams she held up were met with resistance, even from the council members who said they favored new revenue sources to offset some of the cuts that are expected.
Wednesday’s hearing comes at a time when the city is bracing for the upcoming budget season. Officials and the public may soon see such services as libraries and parks trimmed in order to keep Sanders’ pledge that residents’ won’t foot the city’s big bills.
Sanders is expected next month to roll out a spending proposal for the 2008 fiscal year that could still have a $24 million hole in the city’s day-to-day service budget even after laying off 650 employees. He dismissed Tevlin’s fee suggestions as politically impractical.
“She has the luxury of not having to run for office,” the mayor said in an interview after the hearing.
The prospects of raising taxes and fees to help the city pay for the billions of dollars it owes in employee pensions, retiree health care, deferred maintenance and other liabilities has been viewed as a political long shot.
A recent poll by Competitive Edge Research & Communication and the San Diego Institute for Policy Research, the conservative think tank founded by former mayoral candidate Steve Francis, showed that residents were more inclined to sell prime city real estate such as the Sports Arena and Montgomery Field to deal with the city’s financial crunch than to raise taxes. But the respondents favored higher taxes and fees to declaring municipal bankruptcy and drastically cutting city services.
Sanders disagrees and pledged to fill the gap through service cuts and employee layoffs alone. He has claimed since his campaign days that the public doesn’t have the appetite to pay more for the city’s past decisions.
“We need to streamline the city before we come back asking for taxes,” Sanders said.
Sanders hasn’t yet proposed big cuts since taking office, pitching his first year’s financial plan as a “stabilizing year” while deferring the cuts he pledged to make to the following years. Sanders has estimated he will cut nearly 1,000 jobs from city’s payroll and pare down city services over five years to compensate for funding shortfalls that he estimates will run at an average of $175 million a year from 2009 going forward.
While Madaffer, and Councilwomen Donna Frye and Toni Atkins criticized some of Tevlin’s choices for fee increases, they applauded others as the means needed to bolster the city’s books.
“At least allow a civil dialogue prior to blowing up any ideas,” said Frye, who renewed her call for the half-cent sales tax increase she pitched during her run against Sanders in 2005.
Together, the 12 revenue sources Tevlin proposed studying — ranging from a surcharge on 9-1-1 calls for phone customers to a fee to pay for administrating the city’s parking meter card — would stir up more than $30 million for the city. But council members said that those two fees and others in Tevlin’s medley likely aren’t worth the bad feelings they create. Madaffer called them “nuisance fees.”
One proposal, to charge business improvement districts $11,000 each for the city’s administration of the program, drove several officials from the districts, which promote and maintain commercial centers around San Diego, to the meeting to protest. Tevlin estimated the fees could raise $190,000 annually for the city.
“A way for me to cover that fee would be to just stop watering the trees on Garnet Avenue,” said Benjamin Nichols, the executive director for Discover Pacific Beach, who noted that his annual budget is about $50,000. He said the fees “don’t contribute much to the city’s bottom line, but they will remove much from our struggling communities.”
While the council members rebuffed Tevlin on some of her proposals, several were eager to discuss sources that generate greater chunks of money to better plug the city’s fiscal gaps.
Madaffer argued that charging residents for trash collection could free up money in the service budget that is currently spent on picking up homeowners’ trash for free, which is what the city’s bylaws require. In addition, Madaffer said the city could reap more money from the real estate boom of the recent years by hiking the transfer tax a purchaser of property pays.
According to a study conducted in 2005 by the Center on Policy Initiatives, a pro-labor think tank, the city would receive an additional $54 million every year by charging about $10 a month for trash collection and $41 million annually by raising the real estate transfer tax to the average rate of the state’s 10 largest cities. Of those cities, only San Diego doesn’t charge households for trash pick-up.
“At the end of the day, you have to look at what’s going on in other cities,” Madaffer said. “That doesn’t mean a wrong there justifies a wrong here, but I haven’t seen other cites have the problems we have here.”
The CPI study said raising those fees, as well as the taxes on utility use, business licenses and hotel rooms, to the big-city averages would allow the city to stockpile an extra $279 million a year.
Frye lobbied for a half-cent sales tax, which she said could add $100 million to the city’s coffers, but lamented that it would be difficult to garner the support needed to win at the ballot box.
State law requires a vote of the public before taxes can be increased. Council members said they wanted the City Attorney’s Office to analyze other requirements before levying other fees Tevlin proposed, such as adding a surcharge on tickets to events at city facilities that could potentially raise $4.9 million a year.
Jay Goldstone, Sanders’ chief financial officer, said his office is currently working on a program to better enforce existing fees, but said that new fees would not be included in the budget proposal the mayor rolls out April 13. The council, which has the final say on the city budget, must pass a spending plan for the 2008 fiscal year by the end of June.
Councilman Kevin Faulconer, the other budget panel member, said he sided with the mayor. “Choices will continue to be tougher and that’s just where we are,” he said. “At this time, I think we need to focus on living on the budget that we have, the revenue we have.”
Madaffer offered a different prediction: “The mayor campaigned on the promise not to raise taxes, and at end of day, the public will see reduced [services] … and they won’t like it.”