When San Diego’s population and economy grow, it significantly affects how well the city provides its residents with basic services like emergency responses and functional roads. The Rebuild San Diego ballot measure proposed by the city of San Diego pays no attention to this fact.
Both inflation and growth rates impact municipal budgets, and observers frequently confuse the two.
Inflation, or price rate increases, makes it so the city gets less out of each dollar it spends, either in materials, like cement or fuel; or labor, like salaries or benefits.
On the other hand, population or economic growth rate increases, increase city expenditures because they create the demand for the city to purchase more materials or labor to keep service levels even. If there are more people calling 911, there will be a need for more dispatchers, police-officers, EMTs and vehicle maintenance crews. This service demand from growth happens regardless of inflation.
For a large city like San Diego, as population grows, not only does it generate a greater demand for services, but the cost of providing those services to each person also increases alongside increases in population density.
During San Diego’s financial crisis, I compared the revenues and expenditures of the largest cities in California. The Bottom Line, published in 2005 by the Center on Policy Initiatives, found that the city of San Diego had difficulty keeping up with service levels relative to growth from 1990 to 2000.
The report showed there was an all-around deterioration in level of services in the city of San Diego, not just infrastructure, as the population and economy grew.
Now that we are in the midst of an economic recovery, some services are being restored, but in many instances we have yet to catch up equitably.
The natural increases in taxes collected by the city should ideally meet the demand from economic and population growth, and outpace the rate of inflation. For example, general fund revenues this year are expected to grow 5.5 percent annually – almost double the rate of statewide inflation, 2.79 percent annually, according to the ballot measure proposed by the city. Sales taxes are expected to rise 11.1 percent this year, almost quadruple the rate of CPI inflation.
Yet, the proposed ballot measure only accounts for inflation in its projection of spending increases on general services in the future. This limitation prevents the city from applying new revenue that comes from economic and population growth to the increased service needs the city will see as a result of that growth.
By earmarking all increases in sales tax funds for physical improvements to things like roads and sidewalks through ballot-box budgeting, the measure essentially blocks the city from spending a fair share of revenue increases on other services, such as public safety, which, including police, fire and lifeguards, accounts for over half of general fund expenditures.
The math is simple. If over half of incremental general fund revenues through 2022 are set aside for infrastructure, then public safety is going to see its share of general fund spending shrink over time. If all sales tax increases through 2043 is set aside for infrastructure, no sales tax increases will go to public safety – even as service calls increase. Consequently, as population and economic growth increases demand for police, fire and rescue services, spending on public safety services will not be able to catch up on a per-person basis.
By considering only the inflation rate, and ignoring the growth rate, Rebuild San Diego has a built-in assumption of zero growth for other services funded by the sales tax. This is obviously erroneous. The city of San Diego’s population is projected to grow by almost 40 percent, to 1.8 million by 2040, with an accompanying growth in jobs and housing, according to the San Diego Association of Governments. The region’s gross domestic product grew by 3 percent this year, when adjusted for inflation, according to the National University Institute System for Policy Research.
Rebuild San Diego effectively creates a limit on future spending increases for all non-infrastructure services, such as public safety.
The measure undermines the role of the City Council in prioritizing spending during the budgeting process, and balancing the needs of city residents with the resources available that year.
Rebuild San Diego is robbing Peter to pay Paul. Unless the city were to increase tax rates to supplement the declining share of public safety and other non-infrastructure spending, the measure is likely to create an artificial ceiling on increases in public-safety spending, and consequentially cause a long-term decline in the level and quality of services.
Murtaza H. Baxamusa is the director of planning and development at the San Diego Building Trades Family Housing Corporation, and teaches urban planning at the University of Southern California. Baxamusa’s commentary has been edited for style and clarity. See anything in there we should fact check? Tell us what to check out here.