Santa Rosa officials say tax measure needed to curb cuts, avoid layoffs

Santa Rosa is asking voters in the upcoming election to approve a sales tax hike the city says is necessary to shore up its beleaguered budget and avoid laying off dozens of workers as soon as next year.

Measure O, on the Nov. 6 ballot, is a proposed tax increase the city estimates could add an extra $9 million annually to the general fund, the single largest pot of money in the city budget, supporting public safety, administrative staff and public works. If approved by a simple majority of voters, it would raise the city’s sales tax rate over the next six years by a quarter-cent to 8.875 percent.

City leaders are hoping residents will embrace the tax hike as a way to narrow a structural deficit fueled by rising government costs and exacerbated by last October’s fires. Already, the City Council is considering cutting 50 jobs as part of an effort to save $7.1 million - a little under half the city’s projected ?$14.9 million deficit come next July.

Mayor Chris Coursey, former Mayor Janet Condron and the Santa Rosa Police Management Association are among those who signed statements of support for Measure O. A resident of the fire-ravaged Coffey Park neighborhood and a former city finance director also signed on.

“The intent is to use this to help us get through a really tough time,” Coursey said.

However, a local tax watchdog group opposing the measure contends Santa Rosa officials have not demonstrated their effectiveness as stewards of taxpayer dollars. Dan Drummond, executive director of the Sonoma County Taxpayers’ Association, also questions whether Measure O is as critical as city leaders claim and wonders whether it would truly be a temporary hike.

The city is “always looking for more money,” said Drummond, a local lawyer.

Measure O is one of several tax measures on the ballot that could impact Santa Rosa, where the housing shortage and cost of living remain dominant concerns even amid a prolonged period of economic growth and historic low unemployment.

Voters will also decide on Measure N, a $124 million bond to fund city housing projects; Measure M, a 10-year eighth-cent tax to fund county and city parks; Proposition 5, which would enable homeowners 55 and older to be eligible for additional property tax savings upon moving to a new home; and Proposition 6, which would repeal the state’s new gas tax supporting road and transit upgrades.

The revenue from Measure O could prevent layoffs next year, Coursey said, on top of the roughly 50 positions slated for elimination. Most of those jobs are vacant.

“The plan would be to use it to avoid another ?$9 million in cuts,” he said, adding that discussion about specific spending details wouldn’t occur until January when the council considers mid-year budget adjustments.

The extra revenue would be “for unrestricted general fund purposes,” meaning the city leaders would have wide leeway over how it is spent.

The funding is being touted by the city as a safeguard for firefighter and police staffing, though there is no guarantee that any of the revenue would be dedicated to such services. The city’s pro-tax argument on the ballot includes a pledge to spend some of the revenue on fire prevention efforts and emergency communication system upgrades.

The sales tax proposal, which the council placed on the ballot this summer, comes after wildfires devastated the city last October, claiming 24 lives in Sonoma County and destroying more than ?3,000 homes in Santa Rosa alone. The city was forced to tap more than $9 million in reserve funds to cover its emergency response.

Drummond, with the county taxpayers’ association, acknowledged that the wildfires have challenged the city’s finances. But he pointed out that last October’s blazes were not the beginning of Santa Rosa’s financial woes.

“These challenges are brought about by a bigger problem that they have failed to address: the pension liabilities that are escalating,” Drummond said.

Like most Golden State municipalities, Santa Rosa participates in the California Public Employees Retirement System, the state’s massive public pension system.

The city’s combined unfunded liability stood at $338.5 million by June 30, 2017, according to the most recently available CalPERS reports. Its annual payments are expected to increase with no end in sight.

Chuck McBride, Santa Rosa’s chief financial officer, said the city had funded 108 percent of its pension liabilities in 2007. That figure has dropped steadily over the past decade and is on track to continue declining.

The city’s pension obligations will be a target in the budget for the next fiscal year, McBride said, but specific ways to fill the shortfall - increasing revenue or decreasing spending - have not yet been identified.

Coursey, who is serving out his last months in office, acknowledged that personnel costs are a big reason for the city’s budget gap and sounded a pessimistic tone when asked about how Santa Rosa might manage its accelerating retirement costs.

“At this point, the only option we have of managing it is by reducing the personnel costs, which is reducing the size of the organization,” he said, nodding when asked whether that meant laying off city workers.

Layoffs are “not imminent now,” Coursey said, noting that most of ?50 jobs on the city’s chopping block are vacant. But “without Measure O, I think we’re looking at layoffs next year,” he said.

Drummond said he doesn’t buy the argument that Measure O is what the city needs to get its financial house in order.

“Maybe you do, maybe you don’t,” Drummond said. “If you do, make the case to the voters.”

Mail-in ballots go out Monday, marking the start of voting for most of Sonoma County’s electorate. About 80 percent of Sonoma County voters are registered to vote by mail.

You can reach Staff Writer Will Schmitt at 707-521-5207 or will.schmitt@pressdemocrat.com. On Twitter @wsreports.