Deep cuts to such services as police and fire protection, graffiti removal and library hours face Escondido under a projected $8 million budget deficit in the next fiscal year if the city does not come up with a source of new revenue, according to a presentation to the City Council at its meeting last week.
The discussion came as the city considers placing a sales tax increase of between a half- and full cent on the November ballot. After the presentation, the council directed staff to survey city residents on whether they would such a measure.
“That would be the logical next step in this conversation,” City Manager Sean McGlynn told the council.
It would take four votes of the council, or a super-majority, to place a sales tax increase before voters in November, and then a simple majority at the ballot box to approve the measure. The deadline to place the question on the fall ballot is Aug. 12. A similar measure failed to garner four council votes in 2020, with Councilmember Mike Morasco in opposition.
Over the past several months, a council subcommittee of Mayor Paul McNamara and Morasco has been researching issues related to a potential sales tax measure. They presented their findings to the full council last week.
City staff presented the council with four different revenue scenarios, and outlined potential impacts from each scenario on the city’s budget. The scenarios included no new revenue, and potential sales tax hikes of a half-cent, three-quarter-cent and one cent. The potential tax rate increases were labeled, in ascending order, “surviving,” “stabilizing” and “thriving.”
“Operating revenue has not kept pace with the growing costs of municipal services,” Christina Holmes, the city’s finance director, told the council. In compiling the presentation, she said each city department was asked to provide cuts it would need to make if no new revenue becomes available.
Among potential cuts listed in the report were 10 police officers (from the current total of 160), 12 firefighters, three emergency medical technicians and the closure of one fire station (the department currently has 93 firefighter/paramedics).
Other potential cuts included reduced library hours, reduction in park maintenance, possible closure of city pools, reduction or elimination of the city’s graffiti removal program, and a reduction in staff needed to process development and home remodeling plans.
On the flip side, with a full one-cent sales tax increase, the police department could add 25 to 35 new officers, bringing it to the median per-capita range for police staffing in San Diego County, said the report. The fire department could increase its staffing by 12 firefighters and 12 emergency medical technicians under the one-cent scenario.
According to the report, a one-cent sales tax increase — to 8.75 percent from the current 7.75 percent — would raise $28.3 million per year, while a half-cent increase would raise $14.1 million per year.
With no new revenue, said Holmes, the city’s budget deficit is projected to grow from $8 million in the fiscal year that begins July 1 to $23 million by 2036.
Among the expenses fueling the city’s future projected budget deficits, said Holmes, is an annual payment for the city’s unfunded pension liability, required by the state’s pension system for public employees.
Those payments will range between $15 million and $22 million annually over the next several years and the payments will continue until 2044, Holmes said. Those costs remain despite the city’s efforts to curb pension costs by reducing benefits for employees hired after 2012, and increasing the share of pension costs borne by employees.
Council offered a number of suggestions to city staff as the city continues to explore a potential sales tax measure.
Councilmember Tina Inscoe said such a measure should include a sunset clause, in which the tax increase would end after a specified period.
Councilmember Joe Garcia said potential revenue increases should be paired with cost-saving measures to help close the budget gap.
“If we don’t do that, we could easily end up tax and spend, tax and spend, tax and spend, rather than being efficient and rather than doing some cost-cutting,” he said.
Morasco said it’s important the facts of the city’s financial situation be made clear to the public and Escondido’s business community. For example, he said, with a significant portion of the budget gap due to pension obligations, the city could look at issuing pension obligation bonds to retire some portion of its pension debt.
“Pension obligation bonds, like many other cities in the area have done, these could take 50 percent of these dollars were talking about in deficit out of the equation, which significantly alters what we’re looking at right here,” Morasco said.
Under questioning by Morasco, Holmes conceded some of the projected cuts could change as final spending priorities are set during budget deliberations. He said that also should be made clear to the public.
Councilmember Consuelo Martinez said it’s important to note that only voters, not the council, have the power to raise taxes. She said the city already runs on a very lean budget, and “I don’t see where we could ever make up these deficits so I understand why we’re exploring this.”
Mayor McNamara said his mother told him there was no free lunch. “Life costs money,” he said. If the voters decide against raising the sales tax rate, he said, “That runs risk the graffiti starts to go up, the city starts on a downward spiral, investment starts to go down and people start to move out. I don’t think we want that.”
