KEY ISSUES AFFECTING
THE BUDGET
Developing and maintaining a balanced budget involves a
number of trade-offs but often includes a handful of key issues. Three key
issues affecting the City’s budget are 1) revenue stagnation, 2) the cost of
providing retirement benefits, and 3) ambulance service.
Revenue Stagnation
One key issue for the past three budget cycles was flat or
declining revenue. This issue is highlighted in the financial forecast
discussed above and described in detail in the March 20, 2012 Five-Year
Financial Forecast. The revenue from the City’s three primary revenue sources
(property tax, sales tax, and transient occupancy tax) is projected to increase
$580,000 from the Fiscal Year 2011-2012 budget.
However, use of reserves (primarily for one-time capital expenditures),
loss of State intergovernmental revenue, and lower interest earnings offset the
gains in the primary revenues. As a result, total sources are proposed to be
lower in Fiscal Year 2012-2013 than the Fiscal Year 2011-2012 levels.
BUSINESS DATA
Three Largest Revenue
Sources:
Revenue Source
(Dollars in Millions)
|
FY05-06
Actual
|
FY06-07
Actual
|
FY07-08
Actual
|
FY08-09
Actual
|
FY09-10
Actual
|
FY10-11
Actual
|
Property Tax
| $3.346 |
$3.726 |
$3.867 |
$4.066 |
$4.189 |
$4.158 |
Transient Occupancy Tax
|
$3.879
|
$4.209
|
$4.395
|
$3.787
|
$3.830
|
$3.879
|
Sales Tax
|
$2.169
|
$2.143
|
$2.340
|
$2.181
|
$1.620
|
$1.806
|
FINANCIAL
POLICIES
The City recognizes that its primary revenue sources are
locally generated, especially TOT and sales tax revenue, and for the most part
this revenue is largely generated by non-residents. Efforts to ensure continued
reliability in these revenue sources need to be maintained and with additional
efforts to develop and diversify other revenue sources as applicable. The City
actively practices monitoring, auditing and collecting all locally generated
taxes.
SOURCE: City of Carmel-by-the-Sea
April 24, 2012
ANALYSIS, COMMENTS & QUESTIONS
- If the City Council votes to place a referendum on the November ballot and if it is approved by a simple majority of voters, a sales tax increase from 7.25% to 8.25% would represent an increase of 13.8%
- The sales tax – the third largest revenue source after property tax and transient occupancy tax – is already down by 22.8% from three years ago, FY 07-08.
- With an increase in the sales tax, overall sales could decline, small businesses that are barely holding on now may be forced to close their doors, and importantly, revenue projections will probably not double sales tax income from $1.806 to $4 million per year, as Mayor Jason Burnett told Mary Schley (The Carmel Pine Cone), based on past results of revenue estimates by other government entities.
- New revenues arguably may be needed, but the best way to increase revenues is to create a favorable business climate to attract business owners with the goal of 100% business occupancy in the downtown commercial district. With full business occupancy, overall sales will increase and the City will see a healthy growth in city revenues as a result.
- Question: Does it make economic and fiscal sense to increase the tax rate of the tax which generates significantly less than the first and second revenue sources and is the only revenue source which has been flat or declined since FY 2005/06?
- Given that “The City recognizes that its primary revenue sources are locally generated, especially TOT and sales tax revenue, and for the most part this revenue is largely generated by non-residents,” is it fair to place the entire tax increase burden on visitors and tourists in the form of a sales tax increase and a hotel fee?
2 comments:
Just as important, how is the new revenue to be spent? Only on long needed repairs and improvements to the city infrastructure or on a long list of politically favored programs? They won’t provide a list because that would trigger the need for a two thirds vote, so we have to guess.
So far they have emphasized increases to the city staff (is that really a priority?), rigorously enforcing city codes (those bad business and home owners), increased police and fire spending (when is enough?), and oh yes, whatever is left over for fixing our roads and the beach.
Left out is anything regarding sacrifice for the existing high city employee pensions and health benefits, or programs to benefit the residents. The Calpers pension item is a canard. It only involves reducing the interest rate of a current bond, not tackling the long term problem.
This is all about getting more revenue and then they will figure out how to spend it. It is a typical political gambit to benefit a favored few who yell the loudest. Then the politicians declare victory and run for higher office.
Anonymous is absolutely right - how taxpayer monies is spent is absolutely critical. The canard that the city needs more money is just that an unfounded and false story. And if the city was really concerned about finances, it would examine the police department. You know, that police department that was mentioned in the Herald recently with the city auditor saying the police officier probably should have been suspended or fired. The police department's annual budget should be more in line with the fire department. Annual expenditures for the fire department are $1.8 million and the police department are $3.3 million and growing every year. Carmel should merge with a city like Monterey, do away with the Carmel police chief position with the aim of reducing expenditures. The recent hiring of a new police officier tells us the city is not really concerned about expenses, the council politicians want more money to benefit their campaign donors and remain popular for the next election.
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