Monday, May 20, 2019     Volume: 20, Issue: 11
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Santa Maria Sun / Cover Story

The following article was posted on May 15th, 2019, in the Santa Maria Sun - Volume 20, Issue 11 [ Submit a Story ]
The following articles were printed from Santa Maria Sun [santamariasun.com] - Volume 20, Issue 11

Lompoc grapples with long-term solutions to its budget shortfalls, burgeoning pension debt

By ZAC EZZONE


SEISMICALLY UNSAFE
An engineering study in 2014 found structural deficiencies that could cause Lompoc’s fire station No. 1 to collapse during an earthquake.
PHOTO BY JAYSON MELLOM

The city of Lompoc is somewhat isolated, located about 20 miles off of Highway 101. This seclusion prevents the city from receiving the same sales tax revenue generated in most other Santa Barbara County cities by traffic passing through.

In addition, Lompoc has the second lowest median home value in the county behind Guadalupe—the only other city in the county that’s also removed from Highway 101. These lower home values make the city more affordable to live in than other cities on the Central Coast, but it limits the city’s property tax base.

These two revenue limitations are compounded by the massive debt the city owes to the California Public Employees’ Retirement System (CalPERS). This burden, along with slow revenue growth, has put the city in a precarious financial situation as it works on its 2019-21 biennial budget, City Manager Jim Throop said. If the city were to fill every position and operate at full capacity, it would face a $3.6 million deficit over the next two years.

“The big heavy boat anchor that has been put around our necks, that’s what is dragging us down into this deficit,” Throop said at the city’s April 17 budget workshop meeting.

These budget limitations come at a time when, during City Council meetings, many residents have expressed concerns about not feeling safe in the community. Police Sgt. Agustin Arias, who is also the president of the Lompoc Police Officers’ Association, said these concerns reflect what he’s seeing in the community, which is experiencing an increase in gang activity.

In March, a stray bullet from a gang-related drive-by shooting killed a 17-year-old girl outside of a convenience store. This is one of two homicides that have occurred in the city so far this year, which is one more than last year.

It’s difficult for the police department, which is underfunded and understaffed, to address these concerns, Arias said. Over the last two years, the police and fire departments have operated with vacancies due to budget constraints.

The lack of funding has also made it difficult for city departments to maintain and update facilities and equipment. For example, the city’s primary fire station has structural deficiencies that could cause it to collapse during an earthquake, according to a 2014 study completed.

To address some of these concerns, Mayor Jenelle Osborne, who was a council member during the last budget cycle, said City Council should approach the upcoming budget differently than in 2017, when council approved minor cuts to balance the budget.

“It’s a bit of the same discussion going on, and unfortunately the same direction,” Osborne told the Sun. “[There’s] not any proactivity to solve the long-term issue.”
 
Contributing factors

Most of the city’s financial troubles started in 1999 when then Gov. Gray Davis signed Senate Bill 400 into law, which expanded the benefits public workers receive through CalPERS.


UNCERTAIN FUTURE
After spending more than $500,000 cleaning up the Santa Ynez Riverbed, future funding to maintain the riverbed is uncertain because of Lompoc’s revenue shortfall.
PHOTO BY JAYSON MELLOM

Prior to this benefit expansion, the city’s CalPERS obligations were completely funded. Twenty years later, after additional changes to the system and the ebbs and flows of the economy, the city now owes almost $84 million in pension obligations, according to a presentation from Lompoc Management Services Director Dean Albro at a budget workshop meeting on April 17.

The city is slowly chipping away at this debt, but it won’t feel any significant relief until around 2032, when people who have previously worked for the city and collect this pension begin dying, Throop said.

“That’s the peak of additional costs for Lompoc, and once it hits 2032, it will slowly come down,” Throop said. “It could be in 2048 or 2050 before most of the problem is gone.”

During a presentation at a March 19 budget workshop meeting, Albro said the city’s annual payment for public safety workers’ pensions increased $371,227 this year, while its debt on the pensions increased $503,991. This means the city continues to accumulate debt as it pays off these pension obligations.

Lompoc is not the only public entity in California that’s feeling the effects of CalPERS on its budget. According to a study completed by Stanford University professor Joe Nation in 2017, employer contributions to CalPERS could double between fiscal years 2017-18 and 2029-30.

The study, which was completed by looking at case studies of the state and 13 cities, also found that between fiscal years 2002-03 and 2017-18, pension contributions have increased at a faster rate than operating expenses. On average, pension payments made up 3.9 percent of all expenses in fiscal year 2002-03, and 11.4 percent in fiscal year 2017-18.

Although CalPERS is an issue for all cities, former Lompoc City Manager Patrick Wiemiller said it’s especially burdensome for a city like Lompoc, which struggles with generating revenue.

“The reason Lompoc is hit harder than others is because it was starting with a tax base that is lower per capita than other cities around,” Wiemiller said.

Cities in California have three primary revenue sources for their general funds: sales tax, property tax, and a transient occupancy tax that guests at hotels pay. Lompoc has experienced increases in these revenue streams, but the city is still behind others on the Central Coast, said Wiemiller, who was with the city for four years.

Homes values in Lompoc are lower than elsewhere—which slows the growth of property tax revenue—and the city’s location away from Highway 101 affects its potential to capture sales tax revenue.

“Six of the eight cities in Santa Barbara County are located on or along the [Highway] 101 corridor,” Wiemiller said. “You can be traveling by happenstance and stop to spend money in a city. For Guadalupe and Lompoc, you have to get off [Highway] 101 and deliberately be going there.”

The combination of the city’s CalPERS obligations and its limited ability to grow revenue has left the city facing an estimated $3.6 million deficit over its 2019-21 biennial budget. This amount is assuming the city fills all of its open staff positions, which it hasn’t done in recent years.

In order to bridge any gap between the city’s revenue and its expenses, it would have to dip into its reserves, which are already lower than city policy deems appropriate. Throop said the city should have about 25 percent of what it needs to operate in a year in its reserves at all times, which is about $8 million. Currently, the city has about $2 million in its reserves, which wouldn’t last long if the city were to operate at full capacity.

“If we’re running $1.8 million short per year, that is not a good sign,” Throop said. “That will eat the rest of the reserves quickly.”
 
Searching for solutions

Addressing these budget shortfalls requires the city to bring in new revenue or drastically reduce its spending. During the April 17 budget workshop meeting, Throop presented the council with the option of either holding an election for a 1 percent sales tax increase, or slashing 8.7 percent from every city department’s budget—although the latter was less of a suggestion and more of a warning.


SPENDING MONEY
With the city facing a deficit, it either needs to reduce its budget or increase its revenue through a sales tax election.
PHOTO BY JAYSON MELLOM

“I knew the cut couldn’t be across the board [because of city policy], but I was trying to show the magnitude of what that would be,” Throop said.

City Council pushed back on both options. Members weren’t supportive of balancing a budget based on a tax increase or cutting funding from the police and fire departments’ budgets. Throop said that, without new revenue, it’s difficult to reduce the city’s funding enough to cover the deficit while avoiding cuts to fire and police because the departments make up almost 75 percent of the city’s operating expenses. 

City Council made similar demands when drafting the 2017-19 biennial budget, said Wiemiller, who left Lompoc in early 2018 to become Santa Maria’s assistant city manager. Although he primarily left because of the opportunity in Santa Maria, his philosophical differences with City Council also played a factor, he said. He still lives in Lompoc, and as a resident, he believes voters should be able to weigh in on the sales tax issue.

“I can’t understand not being willing to even have the people decide,” Wiemiller said, “because this becomes an issue not about the budget, not about taxation. It becomes an issue about who’s in charge, and I think the citizens ultimately are.”

Over the last few months, many residents have spoken in favor of supporting a sales tax measure during City Council meetings, while some have also voiced opposition to the proposal. Councilmember Jim Mosby said he believes the number of people expressing support for a sales tax increase during council meetings is not representative of how most residents feel.

“I’ve had many, many more people contact me and say, ‘No new taxes, Jim. I’m on a fixed income, and I can’t afford any more,’” Mosby said. 

Mosby and other council members have expressed concerns that a tax increase would be difficult for families living in Lompoc, where the annual per capita income is close to $20,000. However, voters in Santa Maria, which has a similar per capita income, passed a 1 percent sales tax increase with a 74 percent majority in November 2018.

According to a staff report from a Santa Maria City Council meeting on March 5, this sales tax increase is estimated to generate about $18 million in revenue for the city’s 2019-20 fiscal year. Most of the funds generated through this tax are dedicated to public safety improvements.

The same sales tax increase in Lompoc wouldn’t generate as much revenue—primarily because the city has less than half the population of Santa Maria. However, according to a presentation from Albro, the increase would generate an estimated $4.9 million in revenue per year, while costing the average family in Lompoc about $123 annually.

Mosby disagrees with this math. He said he believes it will cost families about five times that amount.

“If you have 10,000 families … of four—because there’s about 40,000 people [in Lompoc]—it will cost about $500,” Mosby said.

Instead of increasing the tax rate, Mosby believes there are other ways the city can avoid a deficit while growing its revenues. He said the city should focus on annexing land to open up space for new housing, which would allow the city to grow its population.

The city is working with Santa Barbara County’s Local Agency Formation Commission (LAFCO) to annex new land and expand the city’s boundaries for the first time since 1999.

Because it’s been 20 years since it last annexed land, the city’s housing supply has remained stagnant for years. Last year, one new home was built in the city, but two were torn down. Throop said a developer is building 44 homes on a small plot of land annexed in 1999, but the city needs thousands of more homes to make up for the years when no homes were built.

Working with LAFCO to annex land is a slow process and doesn’t solve the city’s short-term revenue needs. The city could see some relief through a cannabis tax that voters approved in November 2018, but Throop said it’s too soon to tell how much revenue this will generate.

The city has received 26 applications for cannabis business, but so far, only two retail stores have opened. The applications include a mix of retail and manufacturing establishments that could create new jobs in addition to revenue. Mosby said the city needs to work through these applications quicker to establish this revenue stream.

Resident Joe Garcia argued this same point during the public comment period of the May 7 City Council meeting. He said that rather than asking voters to approve a new tax rate, the city should maximize the cannabis tax voters already approved.

“Here we are, 14 months after accepting cannabis applications, and one business is open collecting taxes,” Garcia said. “You have a source of revenue; you have a way to pay off some of these things. But your focus is continuing to … ask us to give you more money.”
 
Public safety concerns

Many of the residents who’ve spoken in favor of a sales tax increase during City Council meetings cite the city’s need to improve public safety as their primary reason for supporting the proposal.


SAFETY CONCERNS
After the shooting that took place near Ryon Park in January, some residents have expressed public safety concerns during City Council meetings.
PHOTO BY JAYSON MELLOM

During a March 9 meeting, D.A. Taylor, who was born in Lompoc, told the City Council that she’s considering leaving the city due to recent crime that’s taken place. Taylor said public safety should be the city’s top priority when drafting the 2019-21 budget.

“Before we can do economic development, before we can do the parks, before we can do anything, we have to have a community that is safe, and we don’t have that,” Taylor said.

In addition to the two homicides this year, there have been a number of shootings and an increase in aggravated assault, Police Sgt. Arias said.

Mosby said most of the concerns over public safety are overblown and perpetuated by fear mongering in the media and residents during City Council meetings. He cites the police department’s calls for service as proof of no significant increase in crime.

According to the city’s 2018 comprehensive annual financial report, the police department’s calls for service fluctuated between 26,000 and 33,000 from 2010 to 2017.

However, looking at the department’s calls for service isn’t representative of the amount of crime occurring in the city, Arias said.

“You get politicians that want to say our calls for service are down right now,” Arias said. “That’s because during the day we’re using one dispatcher, and we’re running skeleton crews with not a lot of presence in the community.”

Over the past two years, the city’s police and fire departments haven’t operated at full staff levels because vacancies have been held open to offset a shortage in city revenue and turnover in staff. Additionally, the police officers association agreed to hold three officer positions open to secure raises during the last budget cycle.

Excluding the three open officer positions, the department is authorized to fill 44 positions, of which 39 are filled. The department is also authorized to fill eight dispatcher positions, only half of which are filled. In April, the city hired two firefighters, which fully staffed the department. 

Aside from the vacancies, both departments have retention issues that have made it difficult to stay fully staffed. City Council approved $2 million in raises during the last budget cycle to try to improve retention, which helped but hasn’t solved the problem, Arias said.

“We’re at the end of our contract right now, and they are talking budget shortfalls and … everybody else around us is getting paid about 15 percent more, if not higher,” Arias said.


AVOIDING DEFICIT
City Council and city administration are working to address Lompoc’s $3.6 million deficit.
PHOTO BY JAYSON MELLOM

Because of the staff shortage, Arias said some officers get pulled from assignments to work patrol or get pulled off patrol to work as dispatchers. For example, the officer who was appointed to work as a liaison between homeless residents in the Santa Ynez Riverbed and the police department, is spending more time on patrol.

The city spent more than $500,000 cleaning trash out of the riverbed and relocating homeless individuals living in encampments starting last October. With the budget concerns, it’s unclear whether the cleanup effort will receive funding to maintain the riverbed in the 2019-21 budget.

Although the fire department is fully staffed, there are issues with the department’s facilities and equipment that need to be addressed, Lompoc Firefighters Union President Anthony Hudley said.

The most concerning issues are related to the structural deficiencies with Fire Station No. 1, which could collapse during an earthquake.

Hudley said the department is also using older fire engines that occasionally break down and are out of service.

“We have gotten to the point where Engine 1 broke down, the third engine was being used, and the ladder truck broke down … we were close to calling Santa Barbara County and asking if we could borrow an engine,” Hudley said.

Even when the department is fully staffed, it’s short on firefighters for a city its size. Fire Chief Gerald Kuras said national standards recommend cities with a population of more than 10,000 residents to have 1.25 firefighters per 1,000 residents. Lompoc has 0.61 firefighters per 1,000 residents. Any cuts to the department’s budget would lower this ratio even more, he said.

“We’re already low manpower-wise, and [any cuts] would just take us lower,” Kuras said. “If we were to lose three firefighters that would go back to a staffing level in 1986.”

The city won’t have the funding to retrofit Fire Station No. 1 or to address some of the department’s other facility concerns in the upcoming budget, Throop said. The city will also continue to hold three of the police officer positions vacant that were agreed upon in the police officer associations’ labor contract.


PARK MAINTENANCE
One way Lompoc has saved money is by limiting the maintenance it does on city parks.
PHOTO BY JAYSON MELLOM

Lompoc further discussed how it would approach this budget at its third workshop on May 15. A date hasn’t been set for a meeting to adopt the 2019-21 budget, but the next fiscal year begins on July 1. Before that, the city will have to decide whether it will rely on reductions to balance the budget or if it will balance the budget with a planned sales tax election.

If the budget is balanced based on cuts, like in 2017, the city could be in the same situation, having this same conversation again in another two years, Osborne said.

“While we might be able to cut again, I don’t think we’ll be able to find a long-term solution,” Osborne said. “My bigger concern is that it’s a bit of a head-in-the-sand way to address the issue by only looking at the next two years and not looking at the long-term impact.”

Staff Writer Zac Ezzone can be reached at zezzone@santamariasun.com.




Weekly Poll
How should the Santa Maria Joint Union High School District improve its A-G completion rates?

Align graduation requirements with university entrance requirements.
Ensure that students and parents are well aware of A-Gs and what they are before high school.
Improve support services and summer school classes for students who fall behind.
Completion rates are fine as is. Not everyone wants to go to a four-year college!

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