Guadalupe City Hall’s expansive walkways echo with footsteps that reverberate off bare walls with high ceilings as you make your way from one end to the other. The historic building’s halls are wide, tiled, and largely empty.
The u-shaped former-grammar-school campus contains only the basics: city administrative offices in the middle, a police department on one end, and the fire department on the other.
On Oct. 9, during the Guadalupe City Council candidates’ forum, it was easy to imagine an empty city hall, one without the slow bustle that comes with operating a small city of around 7,000 people, with nobody to walk the halls of a building that’s no longer needed. It was a ghost town with darkened windows, and the only activity going on was in council chambers.
Candidates spoke about Guadalupe’s financial situation, the potential of becoming unincorporated, and how to keep Guadalupe an official city. The noise of their words bounced into the old, arched, empty hallway and up into the eaves. Their sound bites were echoes of a city struggling to stay solvent and residents dreaming about Guadalupe fulfilling the potential it’s held for decades.
“We have always been in a financial crisis since I have been here,” said Virginia Mora Ponce, a former City Council member who’s running again. She’s in a race with two others for one of two available seats on the council.
“When we left office in 2012, we had a $50,000 surplus,” she said during the forum. “From that time to today, what changes have happened?”
Today, Guadalupe is facing a $330,000 deficit; a handful of ballot measures that could close that gap by increasing the city’s sales tax, lifting the utilities fee cap, and changing up the business licensing fee structure; and a future with a huge question mark hanging over the horizon.
If all three measures pass, the city’s extra revenue would go toward balancing the budget, according to Andrew Carter, the city’s administrator. He speaks candidly about Guadalupe’s situation. Without that money, he said the city would eventually have to file for bankruptcy or be forced to disincorporate—which can only happen by a vote of the people or through state legislation.
“We’re going to have to address the deficit this year,” Carter told the Sun. “And if we can’t address the deficit, you would assume that a legislator would step in so we don’t go bankrupt.”
Guad’s got potential
In 1946, Guadalupe’s residents voted for their township to become an incorporated city. It was the year after Shirley Boydstun left to attend college.
Boydstun moved back to Guadalupe in 1993, after she retired and “had Los Angeles up to my eyebrows.” She now leads walks through town on the third Saturday of the month as a member of the Rancho de Guadalupe Historical Society. The next walk’s on Oct. 18.
She said what happens on her city walks are a good example of why she moved back to Guadalupe. As she leads people down Highway 1, past faded brick buildings, more often than not, she runs into people she’s known for years and gets honks and waves from acquaintances driving by.
When Boydstun talks about the city’s past, she gets a sort of authoritative tone to her voice. She said the Leroy family purchased 43,000 acres of land in the area “sight unseen” in the mid-1800s with the intention of starting a township. They had it platted—surveyed and laid out into plots—and in 1871, a man named David Laird bought the first plot.
Those pioneers saw the area’s future as one with sellable potential. It’s the same way current residents are banking on Guadalupe as being a city with a sellable future through the DJ Farms development, if and when that future ever gets here.
DJ Farms is a 209-acre housing and commercial development project that’s been in the works for almost two decades. Plans approved by the City Council in April 2014 call for about 800 new homes, which would bring much-needed property taxes into city coffers as well as expand the city’s population, which would—hopefully—increase revenue made off sales tax.
Talk to just about anyone in Guadalupe, and they’ll say that DJ Farms is the key to the city’s long-term sustainability. Officials and residents alike say if the development ever breaks ground, it will help prevent the city from being forced to become part of the county again.
Before the town became an official city, Boydstun’s father was the town butcher at the Pioneer Meat Company. Everybody knew everyone else, and the community got together for each distinct segment’s celebrations—whether it was Swiss-American, Portuguese, or Japanese.
“It was good growing up,” Boydstun said. “It was just a good community.”
Although things are different now—the town’s demographics have changed and the population has grown—she said it still feels comfortable; it still feels like home. In Boydstun’s history with Guadalupe, she said there have always been a couple of things that have been hard on the city’s bottom line.
“We’ve never been able to have a corporation here, someone to pay salaries. We’ve never been able to have a hotel here, which would pay [transient occupancy tax]. It’s a revenue thing. It’s all small businesses,” Boydstun explained, adding that the majority of residents want to stay a city and that she’s definitely voting for all three measures to pass in November.
“Oh absolutely, and everybody else whose arm I can twist,” she said. “I know it’s always been tight, we’ve never been rolling in the dough; we’ve always been hanging in there by our fingernails.”
Scraping the bottom
Guadalupe’s financial situation comes down to this: The city doesn’t make enough money to cover its expenses—and that’s with a 5 percent across-the-board cut to employee salaries and department funding. The projected deficit was originally almost twice what it is now. In fact, Guadalupe’s budget has been in the hole for several years running, but nobody knew how bad it was because of the way funds were allocated in past years.
Carter said that in the past, special fund money was being used to balance the city’s general fund, something that isn’t allowed, especially because special fund money is earmarked for certain things. The administrator took his job in February 2013, and this is the first fiscal year in which he crunched the numbers on his own. He presented his findings to the City Council in May 2014.
Around that time, Bill Statler, a San Luis Obispo-based financial analyst, was contracted to do a high-level assessment of Guadalupe’s financial situation. He determined that there was a couple of approaches the city needed to take to deal with its deficit: borrowing money out of special funds with a payment plan in place that includes interest and increasing the city’s revenue.
“It’s not uncommon for cities to make inter-fund loans,” Statler said. “But they’re going to pay it back.”
Before, Guadalupe wasn’t paying back the money it pulled out of special funds to help balance the general fund’s deficit. Statler said many cities in California have had to borrow special funds, and it’s become more common since the “great recession” that started around 2007.
“Guadalupe is certainly not alone in experiencing its financial stress,” Statler said. Stockton, a city of more than 300,000 people, filed for bankruptcy in 2013. San Bernardino also filed in 2013, and Vallejo was California’s first city to file in 2008.
Theoretically, Guadalupe would only need to borrow money from other funds until the revenue from passage of the ballot measures is fully realized. In his assessment, Statler estimates that to be the 2015-2016 fiscal year. The measures, which are lettered V, W, and X, would bring the city into balance over time, if they’re passed.
Measure V would eliminate a cap on utilities fees. Those fees are set at 5 percent of what the total bill is. The cap is now $2,250 a year, which means an entity or residence has to spend more than $45,000 a year on total utilities—water, gas, electricity, and landline—to benefit from the cap.
With Guadalupe’s average household income at $44,000 a year, Carter said the cap won’t affect residents, adding that there’s only one entity in Guadalupe that spends that much on utilities.
Apio Inc., a refrigerating company on Main Street, spends $45,000 on utilities in the first two weeks of every year.
“The rest of the time, they’re paying for their utilities, but they don’t pay that 5 percent tax,” Carter said. “I believe removing the cap would bring in about $100,000 of revenue per year into Guadalupe.”
Measure W would change the way the city charges for business licenses. The fee is now a flat rate of $60, $90, or $120 per year based on the type of business an entity is, and that structure hasn’t changed since 1979. If W passes, business license fees would be based on an entity’s gross receipts. For every $1,000, a business would pay Guadalupe 50 cents.
“So if you had $1 million [in gross receipts], you would pay $500 a year,” Carter said. Although there would also be a minimum rate of $100 a year placed on a home-occupied business, and a $200 minimum placed on a regular business. Carter believes the change would bring around $150,000 a year into the city’s general fund.
Measure X, which would increase the city’s sales tax by a quarter of a percent, bringing it to 8.25 percent, should generate an additional $62,500 for Guadalupe’s bank account if it’s passed.
All together, that revenue boost would only equal a little more than $300,000, which means the city would still have a deficit.
“It’s grim,” Carter said. “Sadly, even if those measures pass, the city still isn’t bringing in much revenue. … If these pass, we’ll continue to limp along.”
He said the one thing on the horizon that could significantly change the city’s bleak financial outlook is the DJ Farms development.
City saviors
The bulk of the city’s general fund balance goes into public safety: $300,00 to the fire department and $1.4 million for the city’s police, according to Public Safety Director Gary Hoving. He’s a tall man who wears a gun on his hip. He leans back in his chair as he speaks, carefully illustrating all his points with a wave of his hand before clasping them back together again.
One of the options on the table for reducing expenditures was the possiblity of contracting safety services with Santa Barbara County, which the recently incorporated city of Goleta does.
Hoving said he did the math, which he presented to the City Council on Oct. 14, and it’s not any cheaper to go with county-provided safety services. Hoving said the county Sheriff’s Office wanted a contract for $2.1 million and fire wanted $1.3 million.
“Our plan B fell apart, because it’ll cost us $3.4 million,” Hoving said, adding that contracting with the county would also mean a substantial reduction in services, which would be dispatched from Foster Road in Orcutt.
As part of slimming down his expenses for the fiscal year, Hoving cut $200,000 out of his departments. He rearranged shift lengths and reduced overtime. He said the public safety workers unions, for what are already the lowest paid safety departments in the county, agreed to the 5 percent pay cut without a fight, as a sacrifice that would get the city through to the other side.
“Short-term it’s sustainable; long-term it’s not,” Hoving said. “I have a black-and-white [patrol car] in the back with a transmission that’s blown up, and I can’t fix it.”
The workers unions are conducting a door-to-door campaign, handing out fliers to try to educate the community about the measures and why residents should vote for them.
“So if we don’t get taxes, and we want public safety—and if you ask people on the street, that’s a priority—then we have to disincorporate,” Hoving said.
Disincorporation isn’t a quick process. If a special election isn’t called, it could be another two years before voters would be able to weigh in on something like that. Santa Barbara County Budget Director Tom Alvarez said a city disincorporating has yet to happen in the county and hasn’t happened in California since 1973.
“It’s something that’s extremely unusual,” Alvarez said. “So nobody has very much experience with this.”
He added that no less than 25 percent of registered voters have to elect to disincorporate in order to make it happen, unless a legislator steps in and brings a bill before the state’s Senate and Assembly.
In the end, though, it’s not an option Guadalupe’s politicians want for their city. The three candidates vying for spots on next year’s City Council—Ponce, Ariston Julian, and Joyce Earleen Raguz—all said that they supported the measures during the Oct. 9 candidates forum. Mayoral candidates Gina Rubalcaba Almaguer and John Lizalde, both current council members, also said they were in support of the measures.
“We don’t want the county to take over, and it’s not in their best interest to do so,” Julian said during the forum. “We need to have something like DJ Farms come in.”
Contact Managing Editor Camillia Lanham at clanham@santamariasun.com.
This article appears in Oct 16-23, 2014.
