With charts, lists and bullet points, Westminster staff this week drew a bleak picture of what would happen if the city doesn’t re-up its 1% sales tax.
Based on current spending, the city “will be completely out of money” by the 2024-25 fiscal year, Finance Director Erin Backs said at at the March 14 special meeting.
Although often combative, members of the city council were subdued during the meeting, seemingly resigned to the dire fiscal forecast. In recent months, the city’s budget situation has been infrequently discussed during public meetings, which instead have been filled with squabbles about park monuments, personal censures and policies aimed at stifling nepotism.
But on Monday, interim City Manager Christine Cordon suggested that the budget issue is at least being discussed, not ignored, and as such is “no longer the elephant in the room.”
Unless voters decide to extend it, the 1% sales tax in Westminster is set to expire at the end of this year. The council has until August to get the issue on the November ballot.
But even if voters choose to extend it, the tax wouldn’t kick back into effect until April 2, 2023, meaning the city is guaranteed to lose at least three months of the extra revenue no matter what.
Though it’s unclear exactly how much the sales tax generates in any given month, future estimates of budget shortfalls suggest the tax produces about $14 million a year for the city.
Interim Assistant City Manager Adolfo Ozaeta led the presentation with a brief history of Westminster’s financial problems.
In 1978, Ozeta said, the passage of Prop. 13 locked Westminster into a lower-than-average return on property taxes, at least when compared with other cities in Orange County. Then, in 2012, when California ended redevelopment funding, Westminster was left without a revenue source for many of its basic services — leading to layoffs and cutbacks in what the city provides for its residents. Ozaeta said many of those cuts remain in effect.
What’s more, when voters did approve the current sales tax — the 2016 vote on Measure SS — the tax had an unusually short life of six years. Most city sales taxes don’t sunset for a decade or more before voters are asked about an extension.
Westminster had the opportunity to put the issue on the 2020 ballot, and if voters had approved an extension at that time the three-month shortfall could have been avoided. But that ended when Mayor Tri Ta abstained and Councilman Tai Do voted against putting the tax extension on that year’s ballot.
Ozaeta, who said the sales tax has helped Westminster avert bankruptcy, said recent uncertainty about future tax revenue has made it hard for the city “to attract and retain employees.” He said the city currently has 24 vacant positions, including 10 police officers.
Finance Director Backs, who took over the PowerPoint, offered details about the city’s fiscal projections. In the current fiscal year, she said, Westminster projects fiscal health, with $66 million in expenditures versus $71 million in revenue.
But in the 2022-23 fiscal year Westminster revenue is projected to fall to $61 million — if the sales tax is extended and they miss only a few months of revenue. After that, revenues are expected to level off at about $57 million a year.
Meanwhile, she said, Westminster’s expenses figure to grow. Pension payments will go up as will the city’s tab with the Orange County Fire Authority. The shortfall could be covered by city reserves until 2024-25, but after that Westminster could need to meet a shortfall of $7.3 million. A year later, that hole would grow to $27 million.
The city would need drastic slashes to make up for lost tax revenue, Backs said. Most departments would be headed by only one manager – for instance, with no assistant city manager or assistant finance director. Many other employees also would be axed, including roughly one third of the police force.
After-school programs and youth sports would be eliminated, and Senior Center hours and park maintenance reduced.
At the presentation’s conclusion, Councilwoman Kimberly Ho expressed confidence that the tax measure will go before voters. “That’s the most democratic way,” she said.
But, she added, residents don’t have to wait for city officials to take the lead.
“I believe our voters could raise enough signatures to put it on the ballot,” Ho said. “That is not unheard of. If that’s what you want to do, no one is stopping you.”
Ho also recommended that the council, city staff and the community start brainstorming “creative ideas for revenue” other than just taxes.
“What are we going to do between now and August?” she said. “Let’s not sit here and talk about our demise.”
The Council voted unanimously to receive and file the staff report.