Tax Committee’s “Tough Love” Message to City Council
Urging Fiscal Reform Prior to Parcel Tax Vote
At its August 3rd meeting, the Municipal Tax Review Committee (MTRC) voted unanimously to recommend that the City Council postpone a city-wide vote to approve the City’s parcel tax until the June 2012 election. Currently, the parcel tax is scheduled for a vote in the February 2012 election. The MTRC, in exchange for its support of the parcel tax, is offering to give the Council more time to act on its stern recommendations to control City expenditures and begin implementing them prior to the June vote.
A draft report, adopted unanimously by the Committee, spells out in stark terms the financial pitfalls facing the City and the urgent need to rein in expenses. The report notes, “the condition of Piedmont’s municipal finances has substantially deteriorated” since the current parcel tax was passed four years ago. And it adds, “…the larger part of the problem is rooted in spending commitments (and the difficulty in predicting and controlling these commitments) that Piedmont has taken on with neither multi-year planning nor reference to future impacts. This Committee,” the report states, “has determined that current City expenditure trends are not sustainable, and it must immediately take action to control and reduce future spending commitments while it still has the ability to do so, without adversely affecting basic priority programs such as police and fire protection, and maintenance of streets, sewer services and other critical infrastructure investment.”
Seven of the 9 Committee members (2 absent) agreed on the following recommendations. The 7 are Mike Rancer (Chair), David Brown, Bob Hosler, Tam Hege, Eric Lindquist, Robert McBain, and Steve Weiner. (Ryan Gilbert and Steven Hollis were absent)
• Take significant, immediate action to cap employee pension and other benefits and reduce these costs as a percent of salaries (currently 53% of salary, historically 25-33%);
• Zero-out expenditures for the City-owned swimming pool;
• Structure the proposed Blair Park project to have no impact on the City’s future budget for construction, long-term operation, capital maintenance and replacement;
• Before committing to build the proposed Blair Park project, obtain a professional estimate of construction and maintenance costs and a commitment to a schedule of user fees to recover all operating costs;
• If there is strong community interest in subsidizing user-specific programs, consider a public vote on individual parcel taxes to support them, each requiring a two-thirds vote for approval.
An even more forceful message to the City Council is in a second draft report, currently supported by three Committee members (Weiner, Hege and Lindquist). Their recommendation would require the Council to make specific changes in budgets and financial management as a precondition to committee support of the parcel tax. This report, similar to the first, cites the Council’s “failure to plan the finances of the city within the context of five-year budget projections and analysis.”
The second report requires the Council to meet five specific expectations in order to gain the Committee’s support for the parcel tax:
• Commission an expert, independent analysis of employee benefit obligations and adopt a limit on fringe benefit costs;
• Transfer at least $1.3 million a year to three reserve funds for equipment replacement, capital improvement, and facility maintenance;
• Change City policies according to recommendations in the League of Women Voters Task Force on Undergrounding and the Council’s Audit Subcommittee;
• For the proposed Blair Park project: a) obtain an independent, expert cost estimate of construction and ongoing maintenance, including city staff time and replacement of artificial turf, and allow no construction to begin until the project sponsors have transferred construction cost funds to the City; b) impose user fees to cover all ongoing costs; c) require project sponsors to pay all City legal fees for legal action against the project; d) adopt a policy that the City will not subsidize operation of the project under any circumstances.
• No City subsidies will be paid to operate the City swimming pool after July 1, 2012 unless there are offsetting reductions elsewhere in the City budget.
Both Committee reports will be reviewed again at the next MTRC meeting on Wednesday, August 17th at 7:30 p.m. in the City Council chambers.
The Committee also voted to recommend a 50 percent surcharge to increase the City’s sewer tax on property owners for a period of 10 years. The Committee and City staff deem the increase necessary to meet new federal mandates to complete the ongoing upgrade of the City’s sewer system, plus accumulate a $2 million sewer fund reserve. Currently, Piedmont’s sewer tax, a tax in perpetuity, continues with escalators, funding both sanitary and storm drain maintenance.
The nine members of the Piedmont Municipal Review Tax Committee are:
- Michael Rancer, Committee Chair, former Budget Director, University of California Office of the President
- David Brown, Managing Director of Bridgeway Capital Advisors
- Ryan Gilbert, CEO of Bill Float, Inc.
- Tamra Hege, former member of the Piedmont School Board, Piedmont Planning Commission, League of Women Voters, President
- Steven Hollis, investment banker
- Bill Hosler, Catellus Development Corporation and the firm’s former
Chief Financial Officer - Eric Lindquist, financial consultant
- Robert McBain, investment consultant and former managing Director at Bank of America
- Steve Weiner, former Provost at Mills College
Current Spending Trends Result in Growing Annual Deficits
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Implementing Tax Committee Recommendations Results in Balanced Budgets
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Fringe Benefits Have Increased from 25-33% of Salary to 53% of Salary
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I support all of these recommendations, especially as to the Blair Park potential financial sinkhole.