The Santa Barbara County grand jury released a report on April 10 calling Guadalupe’s financial past a “shell game” and recommending that the city disincorporate.
The report essentially comes down to one thing: The city doesn’t generate enough revenue to cover the cost of running itself. Guadalupe City Administrator Andrew Carter said he wasn’t surprised by anything that came out in the report and called everything detailed in its pages old news.
“There’s not any new information in there. … Everything they found was information we gave them,” Carter said. “It’s all stuff we knew about.”
Much of what is contained in the report was discovered by the city’s management team last summer. For instance, the report stated that “Guadalupe continues to be a city in trouble, caused by over 12 years of financial mismanagement,” including improper transfers of money from restricted funds to the general fund and years of deficit spending.
Those issues came to light before the 2014 election, and the city took steps to remedy some of its deficit spending. Residents passed three tax measures designed to increase city revenue by as much as $300,000 a year, and although the city is still moving money between funds, those transfers to the general fund are now in the form of above-the-board loans from restricted funds with interest and a payoff schedule in place. The report acknowledged that the city took those steps, but added that it won’t be enough to dig Guadalupe out of its financial hole.
“These changes are not being implemented to build up the city’s financial reserves, rather they will only cover current budgetary deficits that accumulated over many years of running the city of Guadalupe with insufficient revenue,” the report says.
The DJ Farms development and Guadalupe’s future of property tax revenue also made an appearance in the report, which said if 150 homes “are built as anticipated by the developer by July 2017, this would yield a property tax to the general fund of $75,929.” That revenue and the additional tax-measure generated revenue would still not be enough, according to the report, to cover Guadalupe’s anticipated $630,000 yearly deficit.
And although some of the DJ Farms development is set aside for commercial development (think potential sales, business license, and property tax revenue), nothing has solidified yet in terms of which companies will stake their claims, and full build out of the whole project could take a decade or more.
“The city of Guadalupe’s reliance on the vagaries of the residential and/or commercial real estate market to eliminate ongoing general fund deficits is ill advised. Hope is not a strategy,” the report says.
Carter said he and the rest of city staff know the tax measures and concessions made by city staff are temporary and that Guadalupe has to find additional revenue somewhere, which is why he made a presentation to the City Council during its March 10 meeting.
“I don’t know when they stopped investigating, and then they have to write a report,” he said of the grand jury, adding that the plan presented at that meeting wasn’t included in the report for some reason.
The presentation included a list of potential new revenue sources, including a franchise fee on dumpster and roll-off garbage collection and water and wastewater utilities, and a utility user tax fee charged to the county housing authority, the school district, and/or the cemetery district. Everything included in the presentation was preliminary and would still need to be explored by city staff and voted on by City Council.
But with the way Guadalupe’s residents pulled together to pass tax measures last year, Carter said he isn’t worried about the city’s future.
“I’m not discouraged by the grand jury report. I’m actually energized by it,” he said. “We’re really moving forward, and with the community’s support.”
This article appears in Apr 16-23, 2015.
