City Manager: Sierra Madre Has No Surplus
By admin
Published: Thursday, June 25th, 2009
Newly Reconciled Accounts and Echoes of the Real Estate Boom Boosted Apparent Bottom Line in One-Time Adjustment
Over the past few weeks, some community members have been sent into a frenzy due to the belief that Sierra Madre has a million dollar surplus, and many people are quite dubious as to why the Utility Users Tax (UUT) was even necessary at this point. Yet, contrary to popular belief, Elaine Aguilar, the Sierra Madre City Manager, is firm on saying that “Without the UUT, we would have a budget deficit.”
This “$1 million dollar surplus” is only a one-time occurrence, and cannot be expected to happen again. But, this surplus is not simple as it sounds. A large portion of the $1 million dollars is being redistributed from the General Fund, because that portion contains interest from other funds dedicated to different departments within the city.
The economy also played a huge role in generating the surplus. The 2006-07 year hit the beginning of the huge real estate boom, which triggered home sales, allowing for property value reassessments and, almost certainly, an increase in the amount of tax collected on the properties. That means more money for the city when the value of the home is raised. Two of the most famous examples of this increased property tax revenue are the One Carter and Stonehouse properties, which caused a significant increase in a single year after they were sold at the top of the real estate bubble.
But as we’re all too aware, property values, and the subsequent property tax revenue, have leveled off, to say the very least. That means there will be no increased revenue from property tax in the midst of the nation’s current financial state. Still, the City predicts that property taxes will increase for the fiscal year of 2011; they are keeping the faith that the economy will pick up in the relatively near future.
Then there’s the UUT. While the economy was booming, people changed their spending habits. More people bought fancy HDTV’s, and with that, many people upgraded their cable subscriptions. Taxes on Time Warner Cable television subscriptions and other new Franchise Fees caused revenues to be higher than originally anticipated. Since the City staff was behind on audits, this surplus was not discovered until much later.
The current belief is that since a surplus exists, without the UUT Sierra Madre would still have a balanced budget. But, to clarify, even with the surplus, if the UUT did not exist, Sierra Madre would be experiencing a deficit.
Why? According to Elaine Aguilar, there are “increasing public safety costs,” primarily related to raises negotiated with the Police Officer’s Association (POA). The UUT pays for these rising costs, but if the UUT did not exist the City would still be responsible for the ever-increasing costs. Without an adequate source of revenue specifically tied to these projected costs, the city would eventually end up with a deficit.
In response to the controversy, city officials are making the rounds telling citizens that they should be grateful for the UUT, even if it seems like an unnecessary burden at the moment. It’s saving the city’s budget and all those popular services – like the Police and Fire Departments – that it funds.
By Morgan Carpenter – Photo by Terry Miller
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