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 is against any emergency 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 adopting a utility tax and 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.’”
MONTEBELLO –News that city officials were considering holding a special election to raise the local sales tax or the tax on utilities has prompted a new round of calls for more belt-tightening and transparency in Montebello.
Both proposals could be dead, however, now that the city council has tabled discussion on a 1-cent sales tax increase and/or a 6.5 percent hike in the utility tax, which if passed by voters during a November special election could have raised as much as $14 million in new revenue for the cash-strapped city.
The 4-1 decision to cut off discussion came during the July 27 council meeting, when several speakers questioned the hastiness of the proposals, demanding the council instead tighten spending, starting with cutting their own salaries and benefits.
Councilwoman Vanessa Delgado, the lone vote against tabling discussion on the potential tax ballot measures, said she is looking for a long-term solution to balancing the budget, now over $1 million in the red.
“Selling assets is a temporary solution: We will be faced with the same problem next year,” said Delgado who was disappointed her colleagues did not at least allow discussion of the issues to move forward.
Montebello is again facing a budget shortfall and must find a way to avoid the financial woes of the not to distant past when the city was forced to make drastic cuts in services and shed employees to cover its budget deficits, which at one point reached $12 million.
Mired in political uncertainty and accusations of misuse of funds, and one of the worst financial downturns in history, it took three interim city managers and changes of several department heads to finally get a recovery plan in place to stay afloat.
The situation today is not as critical, but Montebello’s current $1.1 million deficit – the first since the 2010-2011 fiscal year – comes at a time when most cities are experiencing more financial stability and even growth due to improved economic conditions.
Larry Kosmont served as Montebello’s interim city administrator and financial consultant in 2011 and 2012 and was instrumental in helping the city develop its economic turnaround plan, which included putting the breaks on hiring and deep cuts in some city services. The result was several years of balanced budgets.
“[Montebello] had money in the bank, the economy has been strong, [the city] should be in better shape,” Kosmont told EGP.
Like many others, Kosmont believes “belt tightening” is the key to turning Montebello’s finances around, but points out that the council and staff must to be willing to make the tough decisions.
When Kosmont arrived in Montebello, the city was facing a $2.7 million deficit and lacked the cash flow needed to pay employee salaries and day-to-day expenses.
By requiring employees to pay a share of their retirement, implementing furloughs, revising city fees and pushing departments to control spending, the city was able to balance its budget and to secure a loan to pay its employees, EGP reported back in 2011.
The city’s increasing operating costs were something Montebello, a city once nicknamed the “Beverly Hills of the Eastside,” could no longer afford, Kosmont told EGP.
As in most cities, the biggest chunk of Montebello’s budget goes to public safety. This year, 65 percent of the revenue in the city’s $51.9 million budget will go to covering the cost of the police and fire departments.
Contracting out some of those services could be a start to reducing expenses, but Kosmont acknowledges it would be tough sell with residents who have rebuked past efforts to contract with the County while pushing back against paying more taxes.
Larry Salazar, one of the founders of the “No New Taxes” political action committee (PAC), said his group is ready to fight any measure to impose new taxes, just like it did back in 2004.
Salazar said he doesn’t believe the council can be trusted to “know what to do with our money.”
Some claim that a lack of faith in the current council and city staff is why voters in the June Election failed to approve the $14 million sale of the city’s water system, despite “not a dime” being spent in opposition.
“It’s quite evident that there is truly mismanagement of our city budget,” Yvette Fimbres said at last week’s council meeting. “This is precisely why Measure W was voted against…we demand transparency and we have yet to see it,” she said, referring to how the council goes about making it’s spending decisions.
Some of Montebello’s neighboring cities have imposed special taxes to take some of the burden off their budgets, Delgado pointed out to EGP.
But if Montebello can’t raise any taxes or sell off its aging water system, the city will have to look at what are likely to be equally unpopular options,
“People need to understand that if we don’t increase revenue we have to make cuts and layoff,” Delgado said.
Councilman William “Bill” Molinari told EGP he voted to table discussion on whether to take the tax raising measure to the voters because he felt there was not enough time to do proper outreach, and he’s against the city issuing the emergency declaration required to hold a special election on raising taxes in conjunction with the November General Election.
“Declaring a financial emergency could bring risks to our credit rating and bonds,” explained Molinari. A lower rating could increase what the city has to pay in interest on its financial obligations and future borrowing.
According to Kosmont, his 30 years of experience working with cities leads him to believe that cuts to cover a $1 million shortfall could be avoided if time is taken to review every invoice, department and position. For example, he said, many cities get into the pattern of ordering supplies they already have, tying up cash. Looking at what and how the city orders and pays for supplies might have helped Montebello avoid its current deficit, Kosmont said.
For years, current and past councilmembers have bemoaned the city’s inability to attract new, sales tax generating businesses, despite such gains being made by its more working-class neighbors.
But Montebello has struggled to develop a real, long-range economic vision or strategy for the city that is consistent with its current reality, rather than the image of what it was in the past, according to Kosmont.
“It’s not selling property and increasing taxes that the city needs, rather an increase in revenue,” says Kosmont, who points to the city’s failure to develop the Whittier Boulevard commercial corridor as an example of missed opportunity for economic development.
At the time of the city’s past budget woes the country was in the midst of a deep recession, but has since recovered, noted Kosmont.
“Now is the time to act,” he said. The city needs discipline but “it can be done again.
Montebello Councilman Bill Molinari rigorously questioned developers for more than an hour about a proposed residential development in the city, but in the end, the City Council approved Cook Hill Properties’ plan to build 1,200 single-family detached and attached homes in the Montebello Hills, one of the few remaining large open spaces in the San Gabriel Valley.
The development has divided city residents for decades, pitting environmentalists and open space advocates against supporters of adding new housing stock to the region.
“Tonight is a defining moment for this community,” Councilwoman Vivian Romero said before the vote. “Some people are going to be very upset, others are going to be elated.”
The 4-1 vote in favor was reached June 10 after five hours of discussion and public comment during a public hearing continued from a previous meeting that ran too long. Molinari cast the lone dissenting vote.
Margot Eisner of the Sierra Club sponsored Save the Montebello Hills organization told EGP the group met Tuesday to discuss a referendum that would challenge certain aspects of the ordinance.
The group is planning to gather signatures and raise funds to overturn the city council’s decision at the ballot box.
“The city council has not done its due diligence,” she said. “They did not listen to the voters, residents or community members they listened to the corporations.”
Homes in the plan are expected to sell at market rate. There is no plan currently to include low-income or affordable housing in the development.
The development also calls for 314 of the 488-acre site to be kept as open space, including 16-acres of parkland and trails and a federally protected habitat reserve for the endangered California gnatcatcher and other wildlife.
The project could be completed as early as 2022, adding as many as 4,000 new residents to the city.
“You’re either very much opposed to it or in favor,” said Councilwoman Cristina Cortez during last week’s meeting.
She voted to approve the project after receiving some assurances from the developer that they will try to address her concerns, including forming a design review board, developing more park space and giving construction jobs to local residents.
“I’m going to say this bluntly, I want more park space,” Cortez said.
Cook Hills Senior Vice President Norman Witt said the company will work with the community to address their concerns, but cautioned changes to the plans could require additional environmental impact reports.
As he has done repeatedly in the past, Molinari continued to take the developer to task over the safety of people living on an active oil field, the project’s layout and doubt that the development will actually generate the millions of dollars in revenue for the city Cook Hill has projected.
“When there’s a project, or anything being proposed in the city, I try to find 10 good reasons to support something as opposed to you finding 10 reasons why not to support something,” Mayor Jack Hadjinian finally snapped at Molinari.
“What I’m looking for are ways the city can benefit,” Molinari countered.
As planned, “It’s very little of what Montebello needs and a lot of what Montebello doesn’t,” Molinari reiterated.
California’s ongoing extreme drought conditions added a new concerns for some residents, but Dan Arrighi, the water resources manager at the San Gabriel Valley Water Company tried to squelch those worries, saying by the time the last home is built and occupied the water company would have enough water to sustain the additional residents.
Cook Hill said they will make full disclosures to potential buyers about the housing being on an active oil field and below airplane traffic routes, among other things.
The city’s legal advisors reminded the council that they could only consider comments made during the May 25 hearing, before the public comment period was closed.
Flashing flyers from past election campaigns, longtime Montebello resident Tila Gregorian reminded the council that most of them had promised to oppose the development.
Yvonne Watson said she was worried about the project overlapping with other construction projects starting in the near future, including the building of a railroad grade separation and the extension of the Metro Gold Line.
“You have three major projects happening at the same time, each of them have significant, unavoidable adverse impacts to air quality,” she warned.
It’s estimated Cook Hill’s housing development will generate $8.6 million in gross property taxes, with most going to schools and assorted government entities. When fully built out, the project will generate half a million dollars a year for the city, along with $20 million in permit fees and about $750,000 for equipment and staffing for the city’s police and fire department. The Montebello Unified School District will receive over $7.5 million in one-time developer fees to offset cost of taking in more students.
Romero said the “much needed funds” will deliver many of the things the city needs.
“We can fix a lot of streets, we can fix streets lights, trim trees. We can do a lot of things with that money,” Hadjinian said.
A second reading of the ordinances is required before the project becomes final; it will be made on June 25.
The use of $3.4 million in one-time funds to balance the city’s 2015-16 budget caused a rift on the Montebello City Council last week, splitting the council 3-2 for the approval.
Councilman Bill Molinari, the council’s longest sitting member, and Councilwoman Christina Cortez opposed the majority decision that will allow revenue generated from the sale and lease of city land to be used to pay for costs tied in part to the hiring of five new full-time employees, including a new fire marshal, director of parks and recreation and police lieutenant
“I don’t get how you take the one-time selling of assets and call it revenue,” Molinari said.
He reminded the council and people in the audience that it was just 4 or 5 years ago that the city was struggling with a $12 million budget deficit.
“What happens next year when that $3.4 million is not there,” he asked. “How do we then plug that hole when there’s no anticipation of revenue?”
The budget approved by the council includes $51.7 for expenditures, a $4.4 million increase over last year, and $3.9 million more than the $47.9 million in anticipated revenue.
The increase in expenses can be partially attributed to the five new employees, but also includes an increase in retiree pension costs, a rise in the state’s minimum wage to $10 an hour in 2016 and the 5% percent pay raise for police the council approved earlier this year.
According to a June 2014 audit, the city has $5.6 million in its reserve fund.
The new one-time money will come from a $2 million sale of city land and a $1.4 million deal to lease three city-owned properties to a company that plans to build six cell towers on the sites.
“Do you want to cut spending to the tune of about $3 million or would you like to take the one-time revenue, balance your budget and move forward,” asked City Administrator Francesca Tucker-Schuyler in response to Molinari’s questioning of the wisdom of using one-time revenue for items that come with costs beyond the next fiscal year.
“We want to attack, we want to criticize, but we don’t want to come up with any solutions,” Councilwoman Vivian Romero said in defense of the council majority’s position. “It’s about time the city wakes up.”
Growing frustrated, Mayor Jack Hadjinian interrupted Molinari when he attempted to ask staff for clarification on another issue, reminding Molinari that he had the budget binder at his home for over week.
“Did you bother to pick up the phone and call your city manager or your department heads to talk about this matter, or did you wait to come to a council meeting and make it sound like there’s all these uncertainties in the budget?” Hadjinian asked.
Molinari defended himself, saying in the past city staff has not always responded in a timely manner to his requests for more information.
“If the council wants to set a policy where I can call a department head and get an answer, I would be more than happy to do that, it would save a lot of time,” retorted Molinari, He was referring to the fact that most requests for information get forwarded to the city administrator.
Molinari said he does not favor budget questions being asked behind closed doors, out of public view.
“This is their money we’re spending,” he said in frustration. “We’re talking about $50 million.” “We keep talking about transparency, I’d like to see a little more of it.”
Not one to let a critical comment slide, Hadjinian quickly responded with a criticism of his own.
“Those ‘closed-door’ meetings you’re talking about, that is a council briefing,” he said. “You refused to meet with staff and you want to call it non-transparent practice, I would disagree and say that’s shameful for you to say on the dais.”
“What you’re trying to do is create uncertainty in the public’s mind.”
But Molinari said he shouln’t have to call staff to find out if there are changes in the budget; they should list them as budget agenda items.
In a condescending tone directed at Molinari, the mayor then instructed the city administrator to next year draw arrows, circles and notes in the budget to “make it easier for councilmembers who’d rather not ask questions and act like it was shoved down their throat to approve.”
“The bottom line hasn’t changed,” clarified Tucker-Schuyler. “The composition may have shifted because they combined two different sections into one.”
Molinari suggested the city conduct more public study sessions on the budget the way it has in the past.
“Again, these are all estimates, we don’t have a crystal ball to really know what kind of revenues will be received by the city,” said Tucker-Schuyler.
Update 4:27p.m.: Corrected city manager to city administrator; editing errors.