To Get Out of the Red, City Considers Raising Taxes

By Nancy Martinez, EGP Staff Writer

MONTEBELLO – With no assets to sell or a voter-approved utility rate increase to generate more money, Montebello officials are now scrambling to figure out how to avoid a $5.6 million budget shortfall. Among the items under consideration: a possible sales tax increase.

“Certain [past] fixes have been Band-Aid(s),” said Mayor Vivian Romero last week during a presentation on a draft of the city’s budget. She was referring to past actions to balance Montebello’s budget, at least temporarily.

“We need to look at long term solutions,” Romero said.

Montebello has struggled to find it’s footing ever since California’s 425 redevelopment agencies (RDAs) were dissolved in 2012, taking away a pool of money cities depended on to encourage economic development that would in turn increase funds for city services.

Since dismantling its RDA, Montebello has had a tough time keeping its budget in the black – despite an increase in other revenue – at times turning to the sale of city-owned properties to generate one-time funds.

With those options maxed out, city officials are now eyeing as possible remedies increasing the sales tax, implementing a utility user tax and hiking fees for city services.

Montebello’s Fiscal Stimulus Ad Hoc Committee, created in 2016 specifically to come up with ideas for raising city revenue, presented the three options during the April 12 city council meeting.

While tax increases and fee hikes are generally unpopular, Montebello resident and employee Cecilia Lopez supports increasing taxes as a solution to the city’s financial crisis, which could result in a $5.6 million budget shortfall in 2017-2018 if no new money is found or costs cut. The shortfall include $1.7 million to fund city-owned operations such as the golf course and water system.

“Let’s invest in long term solutions,” Lopez urged the council during the meeting.

The city projects revenue of $54.2 million for 2017-2018, but ongoing costs for police and fire, parks and recreation, street maintenance and other city services are expected to hit nearly $60 million.

“This is just the cost to operate at the very minimum,” emphasized Councilman Art Barajas.

The ad hoc committee –made up of Romero, Councilwoman Vanessa Delgado, department heads and representatives from the city’s bargaining units ¬¬– estimates a 1-cent hike in the sales tax would generate $9.5 million a year in new money, more than enough to cover the projected deficit.

If approved, Montebello’s sales tax would jump to 10.5 percent, after adding in the voter approved quarter-cent tax hike for countywide transportation improvements and a quarter-cent increase to combat homelessness, which both go into effect July 1.

Voters in Pico Rivera and Commerce have approved similar tax increases to fund long overdue infrastructure repairs and other services. According the city, a 1-cent increase could produce as much as $190 million for Montebello over the next 20 years.

“When we visit those cities [and spend money] we are helping them, why not help ourselves?” said Montebello City Employees Association member Delia Delgado, who like Lopez supports a sales tax increase.

Montebello officials said last week they would consider studying city fees to determine if they are in line with those in other cities. Ad hoc committee members believe such a study would conclude fees should go up, and estimate a 10 percent hike on permits, plan checks, fines and penalties would bring in another $690,000 a year.

The city previously estimated taxing utilities would generate $5 million in added revenue.

Neighboring cities have both a utility tax and higher sales tax, pointed out Councilman Jack Hadjinian, who favors an increase.

The soonest the city could put a sales tax hike measure before voters would be November 2018, unless the city council opts to declare a fiscal emergency and pay for a special election. Waiting until 2018 would not solve the city’s immediate financial issues.

Councilman Bill Molinari said he would consider an emergency declaration, so long as the community is properly informed and the city is advised of the impacts of the declaration. Last year, he successfully stopped the council from putting a tax hike measure on the ballot, saying such a move would put the city’s credit rating for bonds at risk. Molinari prefers to look into updating the city’s fee schedule as a way out of Montebello’s financial crunch.

Councilwoman Delgado, who last year proposed the sales tax hike, now says she understands why the measure did not move forward and why residents voted against raising water rates, which would have generated millions of dollars in added revenue.

“We need to build trust,” she told her colleagues, implying residents do not trust the council to use the money wisely or as intended.

The ad hoc committee suggests forming an advisory committee that would recommend to the city council how any additional sales tax revenue should be spent.

The bottom line is the structural deficit will only get worse without action, Barajas said.

‘We’re going to deal with it this year or the following year,” he argued. “This [deficit] is very real; it’s not going away on its own.”

A representative of the city’s transit union, Albert Rivers, said he is tired of hearing about the “transformation” taking place in Pico Rivera due to the added sales tax revenue.

“I’m tired of them saying, ‘look at Pico [Rivera],’” he said. “It’s time they say, ‘look at Montebello.’”

Update: April 28, 2017 3:15p.m. clarifying Councilman Bill Molinari’s concerns and preferences.

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April 20, 2017  Copyright © 2012 Eastern Group Publications, Inc.

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