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HomeMy WebLinkAboutItem 3c - Proposed Ballot Measure for Revenue Enhancement to Support Vital City Services DATE: December 5, 2017 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager By: Michael Bruckner, Assistant to the City Manager Hue Quach, Administrative Services Director SUBJECT: PROPOSED BALLOT MEASURE FOR REVENUE ENHANCEMENT TO SUPPORT VITAL CITY SERVICES Recommendation: Continue public outreach and plan for a ballot initiative be placed on the April 2020 General Municipal Election SUMMARY As part of the budget adoption process, the City Council requested that staff review potential revenue enhancements in order to address the long-term fiscal stress the City will be facing as a result of the increasing costs of service. The City retained the services of the Lew Edwards Group to explore the feasibility of placing a sales tax measure on the ballot at an upcoming election, in addition to measuring resident satisfaction with City services. While the resident satisfaction survey generally concluded that Arcadia residents are extremely satisfied with the services the City provides, it also identified that the City’s looming fiscal challenges are not well understood by the voting public. Based on these findings, it is recommended that the City Council direct staff to continue a broad public outreach campaign and plan for a ballot initiative on the April 2020 General Municipal Election. BACKGROUND Over the years, the City of Arcadia has taken several steps to manage costs without sacrificing the quality of services. This includes major pension and benefit reforms in 2011, budgetary adjustments, competitive bidding practices, and finding efficiencies through innovation over time. Even with these practical and ongoing approaches to effective municipal management, the long-term fiscal outlook for the City is daunting. Proposed Ballot Measure for Revenue Enhancement to Support Vital City Services December 5, 2017 Page 2 of 5 Due to recent policy changes from CalPERS (“PERS”), the City is facing a significantly rising increase in payments to PERS beginning in FY 2018-19 through FY 2024-25. As a result of these increases, the City is faced with two options: 1) reduce services and expenses by millions of dollars every year in order to offset the constantly increasing costs, or 2) seek additional revenue enhancements. Naturally, a combination of these two options is also possible. During the Fiscal Year 2017-18 Budget Study Session on May 16, 2017, the City Council requested staff review revenue enhancements in order to address the long-term fiscal stress the City will be facing as a result of the increasing costs of service. At the City Council Study Session on August 1, 2017, a discussion of revenue enhancements through a voter approved sales tax measure was presented to the City Council. Due to time constraints, this item was continued to the City Council Study Session on August 15, 2017, where the City Council voted unanimously to begin exploring a sales tax measure. On September 19, 2017, the City Council approved a professional services agreement with the Lew Edwards Group (“LEG”) to explore the feasibility of placing a sales tax measure on the ballot at an upcoming election, in addition to measuring resident satisfaction with City services. DISCUSSION As part of their public engagement effort, LEGs opinion research firm conducted a citizen satisfaction survey in October to measure resident perceptions of City services. The survey concluded with 451 interviews of City voters using a combination of online and phone surveys in English, Spanish, and Mandarin. According to the survey results, Arcadia residents are highly satisfied with their quality of life and vital City services. Seventy-nine percent (79%) of City residents agree that Arcadia provides a better quality of life than other nearby communities, and nearly 70% of residents say City services are excellent or good. Residents expressed strong job ratings for the Arcadia Police Department, with 84% giving local law enforcement a $11.6 $12.9 $14.2 $15.4 $16.3 $17.0 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Aniticipated PERS Contributions (in millions) Proposed Ballot Measure for Revenue Enhancement to Support Vital City Services December 5, 2017 Page 3 of 5 favorable job rating, and 91% of respondents saying that maintaining local police protection was an extremely/very important priority. Residents also showed concerns about public safety, with nearly 73% of respondents perceiving that the City has become less safe in recent years. Among other services, preventing and investigating property crimes were priorities for 92% of respondents. Given the looming fiscal challenges on the horizon, the City’s ability to be responsive to public safety concerns, among others, will be constrained without additional resources to adequately address community issues. The survey results also indicated that the voting public is generally unaware of the fiscal challenges the City is facing. Therefore, a lengthy and robust public outreach effort is recommended to ensure that Arcadia voters are fully informed regarding the financial challenges facing the City before being asked to vote on a measure. As a result, the City Council must decide the pros and cons of moving forward with an initiative at an upcoming election. The next General Municipal Election for Arcadia is scheduled in April 2018. In order for the measure to pass, a simple majority (50% +1) is required; however, given resident perceptions of City services, it is recommended that an alternative election be selected to allow for a robust public outreach effort to engage residents in a dialogue regarding the fiscal challenges facing the City. There are two statewide elections scheduled for 2018, a Primary in June and a General Election in 2018. Because these elections do not coincide with the City’s municipal election, the requirement for voter approval of an initiative increases to the two-thirds (67%) threshold. To lower the threshold to a simple majority, the City Council would need to declare a fiscal emergency by unanimous consent. To justify its use of emergency powers, a public agency must prepare a comprehensive set of legislative findings based upon evidence. At a minimum, that document should show the following: 1. An actual emergency exists; 2. The agency has taken reasonable steps to address the problem prior to invoking the emergency; 3. The public agency should demonstrate a nexus between the emergency and the actions taken; 4. The agency must consider alternatives to emergency measures. Another option would be to place a special tax measure that would dedicate funding to a specific purpose like public safety on any special election date the City Council chooses. This would forgo the need to declare a fiscal emergency; however, the two-thirds (67%) threshold is the requirement for a special tax. A special election must be held no sooner than 88 days and no later than 103 days from the date the City Council chooses to call such an election. Proposed Ballot Measure for Revenue Enhancement to Support Vital City Services December 5, 2017 Page 4 of 5 Deferring to April 2020 for the lower simple majority (50%+1) threshold allows for plenty of time to educate the public on the City’s financial conditions and also to explore every available alternative to raising taxes. Given current known assumptions and projections, however, it would also likely mean that the City would be in an operating deficit and relying on General Fund reserves to maintain City operations at current levels in the next two years. Should the measure fail at the time, the City will be forced to reduce services in order to balance the budget. The table below summarizes the various options. Election Date Approval Threshold Fiscal Emergency Declaration April 2018 Simple Majority (50% + 1) No June 2018 Two-Thirds (67%) Yes* November 2018 Two-Thirds (67%) Yes* Special Election Two-Thirds (67%) No April 2020 Simple Majority (50% + 1) No * With the declaration of fiscal emergency, the approval threshold would drop to 50%+1. Due to the need for sufficient outreach to properly inform the public on the City’s financial situation and the need for the additional revenue to continue to meet their service expectations, choosing an election date after April 2018 is highly recommended. Due to the difficulty of reaching a super majority, it would also be recommended that the City Council choose an election format that only requires a simple majority. Therefore, it is recommended that the City Council direct staff to plan for an April 2020 ballot measure and to utilize the time to fully engage the public in a discussion on the City’s finances, service levels, and community expectations. As part of the approved contract with LEG, the consultant is expected to develop informational materials for the City’s website, traditional media, and social media, in addition to collateral for direct mailing in order to engage with Arcadia residents regarding the City’s financial outlook. Translation services will be provided for the printed materials into Simplified Chinese in order to reach the greatest number of residents possible. There is sufficient funding in LEG’s contract to support a public engagement strategy through the end of this fiscal year; however, if a different election is chosen, staff will return to the City Council with a proposed amendment to expand those efforts. Proposed Ballot Measure for Revenue Enhancement to Support Vital City Services December 5, 2017 Page 5 of 5 ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT The contract with the Lew Edwards Group contains $15,000 for public outreach services, which have not yet been expended. It is estimated that an additional $80,000 to $125,000 will be required to support the consultant’s efforts through 2020, which is dependent upon the election timeframe and format selected. Funds will be requested as part of the FY 2018-19 budgeting process to continue the consultant’s work beyond this Fiscal Year. An approved sales tax measure would enhance the City’s revenue by approximately $8 million per year. RECOMMENDATION It is recommended that the City Council direct staff to continue a broad public outreach campaign and plan for a ballot initiative on the April 2020 General Municipal Election.