City to tackle $5.2 million projected deficit
October 18, 2011
SOUTH LAKE TAHOE, Calif. – Figuring out how to fix a projected $5.2 million deficit for the 2012 fiscal year is one of the topics the South Lake Tahoe City Council is set to address at its meeting today.
The budget discussion is set for 2 p.m. at the City Council Chambers at 1901 Airport Road.
At the council’s last discussion about the budget in September, about 150 people attended to voice their concerns about the future of South Lake Tahoe Senior Center, cuts to parks and recreation, changes to retiree health coverage and increasing the number of temporary employees providing snow removal services from seven to 15. Three fire division chief positions could be eliminated under the budget proposal. Four police positions are not expected to be filled following a series of retirements.
City staff took those concerns into account in developing three new revenue streams to help soften the blow. None of the proposed revenue streams will entirely cover the projected shortfall, however, they could reduce the impact on layoffs, in particular snow removal and streets staffing.
To balance the budget and eliminate the $5.2 million projected deficit, the city is proposing the following measures:
• $1.7 million in budget savings through proposed reorganization of the City Street Division, Parks and Recreation, Police, Fire, Finance and Engineering services, including the elimination of positions, and benefit reforms. Approximately $1 million, or 60% of the $1.7 million in savings comes from the Fire and Police Department.
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• $314,000 in additional operation expense reductions.
• $1.8 million in General Fund revenue increases, including the use of $500,000 in Health Plan reserves and $140,000 in unassigned General Fund Operating reserves, and $465,000 in new beach parking revenues, golf course and camping fee increases and building permit fees.
• $270,000 in Redevelopment Agency expense reductions.
• $675,000 General Fund loan to pay the State’s proposed $1.8 million Redevelopment Agency continuation payment requirement, and a $319,000 operating transfer from the General Fund to the RDA.
City staff is also proposing three new possible revenue streams. If passed, the money from these measures would be dedicated to reducing the number of proposed Snow Removal/Street Division employee layoffs and preserving the integrity and life span of our city streets.
Additional suggestions of increasing the Transient Occupancy Tax or initiating an amusement tax on outdoor recreational rentals (ski, snowboard, bikes, boats) was considered, but postponed until 2013 when the revenue from a proposed 2 percent TOT increase and 5 percent amusement tax would be scheduled for a public vote to pay for the debt service on $25 million in community road, infrastructure and facility improvements.
The first proposed new revenue stream comes from raising vacation rental permit fees. Vacation rental permit fees are currently $210 for a new permit and $144 for a renewal permit. The fee generates $175,000 in revenue, and the program’s operating cost is $245,000.
The application fee states that the vacation home rental permit fee shall be no greater than necessary to defer the cost to administer the vacation home rental permit ordinance. To that end, the city could increase the fee 40 percent to generate $70,000 to cover the total program cost of $245,000. A 40 percent increase would result in a fee of $294 for a new permit, and $202 for a renewal.
Douglas County charges $100.00 for a new permit, and $75 for a renewal. Placer County charges $107 for a new permit and $16 for a renewal and EI Dorado County charges $75 for a new permit and $65 for a renewal.
Increasing the vacation rental permit fee is it does not require a public vote and can be approved by City Council action. The last time the permit was increased was September 2008 to provide the funding for enforcement by the Police Department. The fee was increased from $75 to $205 for new permits, and from $50 to $140 for renewal permits. Due to annual consumer price index adjustments, those fees are now $210 and $144 respectively.
The additional revenue would be earmarked for the vacation rental permit program. However, this would free up $70,000 in General Fund expense to be invested elsewhere.
A second proposal includes increasing the city’s business tax. Business tax revenue in 2012 is projected to be about $1 million.
Businesses pay business taxes per $1,000 of gross receipts pursuant to a business classification schedule ranging from $1.08 to $2.90 per $1 ,000 of gross receipts.
In a November 2012 ballot question, the city proposed revising the City’s business tax rate schedule to reduce the business tax rate by 10 percent on about 95 percent of city businesses, and increase the maximum business tax on 5 percent of businesses from $3,387 to $10,000 with a maximum annual inflation escalator of 3 percent.
A business would have to generate $10 million in gross sales to reach the $10,000 maximum business license fee.
Measure E failed with 50.8 percent voting no, and 49.2 percent voting yes. If the measure passed, the city estimates it could have generated $150,000 in additional business tax revenue annually.
If the business tax was raised, revenues from it could be used to enhance city services in general, or specifically to eliminate the need to layoff a Streets/Snow Removal Supervisor and three Snow Removal/Streets Heavy Equipment Operators.
A third option includes charging utility companies a fee for cutting city streets to install utility lines and conduit, something the city currently does not do.
The City does charge a street trench permit fee which generates about $40,000 annually to offset the cost of engineering staff’s review and approval of street trench cuts.
The City’s current utility trench permit fee, and the utility companies paving of utility cuts, does not compensate the City for long-term damage caused by utility cuts.
A utility cut fee, while not available to offset street operation expenses, could act as an incentive for utility companies to coordinate their excavations with the City’s repaving schedule and generating funds to pay for road resurfacing due to the need for extra thick layer of asphalt.
Based on an average annual City street cut road surface volume of 20,0000 square feet, a street cut fee of $3.50 per square foot to repair a below average road, would generate $70,000 annually for the City.