Vernon Businesses Feel Sting of Balanced Budget
The city experiences 2% increase in expenses.
By Nancy Martinez, EGP Staff Writer
After years of financial instability the city of Vernon continues to slowly get its finances back in order, balancing its budget again this fiscal year.
But the balanced budget could be coming at the cost of the city’s business-friendly reputation according to Peter Corselli of U.S. Growers Cold Storage. At the June 17 city council meeting, Corselli said Vernon is becoming “unfriendly to businesses” and relying to heavily on rate and fee increases to deal with it’s financial issues, including the 2% increase in overall expenses in the latest city budget.
“Whenever the city needs money we go out to the businesses,” Corselli said.
Vernon anticipates its $343,302,500 in revenue will be enough to cover the city’s expenses during the 2014-2015 fiscal year, including higher operating costs. It will not, however, have a surplus — often viewed as a sign of financial stability — and for the second year in a row there will be no new money added to the city’s reserve fund, which finance director William Fox said now sits at $13.6 million.
“We came out of a bad year…we have a challenge before us to balance the budget,” Fox said.
Vernon’s expenses have increased $6.7 million over last year and according to City Manager Mark Whitworth, rising fuel costs deserve most of the blame.
The two-percent increase, however, does not sit well with Vernon Chamber of Commerce President Marisa Olguin who warned the council and city staff that offsetting those increases by hiking the fees and rates paid by businesses would be a “major concern” to the business community, which in Vernon numbers over 1,800 businesses compared to just around 100 residents. Approximately 50,000 people work in Vernon.
“Things are escalating quickly and slowly killing the hand that’s feeding the city,” Olguin told the council.
The council has approved a new fee schedule for city services that is tied to the consumer price index. The decision comes on the heels of a study that some showed fees charged by the city do not cover the cost to provide the services, said Fox.
Businesses fees, such as those paid for plan checks are expected to be “a little more than before,” Fox said. “The city was undercharging … when you undercharge the service is subsidized with taxes,” said Fox, who emphasized that the city still charges 65 percent of what it can charge legally.
The fees increases are expected to generate $1 million more in revenue for the city.
Also adding to the worries of local businesses is the five percent electric rate increase that takes affect in July. The city says the additional funds will go toward meeting state renewable energy requirements for public utilities, which must total 33 percent by 2020.
Fox told EGP the city has no desire to be a financial strain on businesses, and pointed out that even with the recent utility and fee hikes, Vernon still charges less than its neighboring cities and below current market value. He added, however, that he knows city staff need to do a better job of communicating the reasons for the increases, something they will attempt to do at a future study session.
“We still want to be very businesses friendly,” Fox emphasized. “We’re just trying to cover a portion of our costs.” He is recommending that the city conduct fee studies every three to four years to be sure that fees are in line with costs.
Vernon spokesman Fred MacFarlane told EGP that the city’s new fee structure reflects a more equitable, shared-cost, between the city and businesses when compared to previous years.
Fox adds that the city has done its part to reduce expenditures over the last seven years, including cutting staff down from 322 employees to 249.
“We are trying to hold the line so it doesn’t affect our services,” but after years of a reduced man power, overtime and shifts in responsibility, Fox said it’s time for the city to begin filling some of its vacant positions.
In 2013, Vernon voters approved a three-prong business tax, but Fox told EGP there are no plans to ask the city’s 80 or so voters to approve additional tax hikes.
As part of the city’s good-neighbor reform policy worked out with Senate Pro Tem elect Kevin de Leon, Vernon’s new budget includes over $2.1 million for the Vernon CommUNITY Fund.
The 2014-2015 budget calls for a plan to look at the city’s finances over the next five to 10 years, and to identify ways Vernon can save money and improve cash flow, such as refinancing some of its debt.
The city also plans to address capital improvements such as aging infrastructure, public safety vehicles, street and utility repairs.
“This is something we didn’t sustain for a few years because of the downturn of the economy,” said Whitworth.
Olguin called the city’s streamlining of services that has kept costs down in the past a “step in the right direction,” but added her members hope the city will considers other options to offset rate increases.
“At the end of the day, [the budget] represents a two-percent growth and what we want to be able to see is a two-percent decrease,” Olguin said.
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June 26, 2014 Copyright © 2012 Eastern Group Publications, Inc.