If passed by Signal Hill voters next year, a controversial initiative known as “Taxpayers’ Right to Know and Vote” would have immediate and long-term financially crippling affects on the City, according to a report from an independent consultant.
Proponents of the initiative, however, refute the consultant’s claims, stating that the specialist misinterpreted the initiative’s language, made inaccurate statements and left out pertinent information.
During the Signal Hill City Council’s Tuesday, Nov. 5 meeting, municipal consulting firm Urban Futures, Inc. presented the lengthy report on the fiscal impact the initiative would have on the City.
A watchdog group known as Signal Hill Community First, which drafted the initiative as a way to increase transparency and create a way for voters to become more involved in the City’s budget process, was able to gather enough signatures through a six-month signature drive to get the initiative on the ballot for a June 3, 2014 special election.
The initiative, if passed, would amend the City Charter to require that all city taxes, assessments and fees be approved by a two-thirds majority vote in a special election. The measure would also require that all city taxes and fees sunset every 10 years.
Urban Futures, Inc. President Michael Busch, who assisted the City of San Bernardino through its bankruptcy and is the former chief financial officer for the City of Claremont, however, described a doomsday-type scenario if the initiative were to pass, stating that it has the potential to impact about 13 percent of the City’s General Fund budget or $2.1 million in city revenues. He said requirements of the proposed initiative would have the most impact on the police department, public works department and community services department.
The main cause for concern is that the initiative’s sunset clause, as the consultant sees it, would immediately force Signal Hill to restructure its entire budget process and make two economic forecasts– one for elections and another for the proposed budget.
“I don’t know if there really is a best-case scenario because, if it passes, there is going to be impact no matter what,” Busch said. “Your process of how you manage changes on the day that it’s approved in terms of preparing yourself for not having all these things in 10 years… Everything will change.”
Signal Hill Mayor Michael Noll said restrictions that the “Right to Know and Vote” initiative would put on the City’s ability to carry out its financial goals would be compounded by the State’s demands, which he said are changing continuously.
“The State is changing the rules constantly, so it makes you have to be very flexible in order to survive, and I think we’ve done a very good job on that in the past,” Noll said. “But if your hands are in the toolbox and it’s empty, then there’s not a lot you can do. So, hopefully, we’ll move down the road and everyone will understand it a little bit better. I certainly understand it, and I think we’ve done a great job.”
Busch stated that Signal Hill is considered a no/low-property-tax city that relies mostly on sales tax, adding that sales-tax revenue makes up nearly 66 percent of the City’s budget. He praised the City for managing itself well financially unlike other cities that have constantly raised taxes and assessment rates to pay for services.
If the initiative were to pass, however, Busch said the City would have to become “ultra conservative” with its finances going forward and the measure would put the City at risk financially.
Busch cited a League of California Cities study that states 49 percent of all initiatives with a two-thirds-majority-vote requirement have passed in the state over the past three years.
In the long term, having no guarantee that the City would be able to raise charges would not only put the City at risk of having its credit rating downgraded, it would also constrain the City from negotiating developer incentives, imposing impact fees that raise revenue from development projects while causing problems for issuing any new bonds, negotiating labor agreements with city unions or refinancing city debt obligations, he said.
Busch predicts that the uncertainty the initiative would cause may eventually lead to an “exodus of brain power,” meaning top officials will leave for other cities.
The consultant also said the initiative would require the City to conduct special elections in order to raise charges that are regularly adjusted due to inflation, for cost-recovery purposes, matching grants or for continuing franchise agreements with various companies for services.
He said the measure could also put the City’s California Crown Landscaping Assessment District, an area where property owners have agreed to assess themselves for maintenance purposes, up to a citywide vote.
Busch added that he’s not aware of anything like the initiative ever being proposed in the state or the nation.
Furthermore, the consultant says the City would not only have to constantly pay thousands of dollars a year for conducting and educating the public about the special elections, it would also have to hire new city staff in either the city manager’s, city clerk’s or finance director’s office just to determine the constant impact the initiative would have on the City’s budget.
“Under your proposed initiative, it’s going to be difficult to make some assumptions,” Busch said. “You’ll know when your problems come. You just won’t know when to address them, whether you do it two elections prior in case it fails or whether you do it the election before. It’s constant planning and a constant effort to manage and maintain what you have.”
In response to the consultant’s findings, Signal Hill Finance Director Terry Marsh implied that having to deal with a potential 13-percent structural deficit might eventually force the City to lose its incorporation status.
She gave an example in which the City of Stanton, where she worked as the finance director, was nearly put in a similar position after dealing with a comparable deficit that caused the city to make harsh budget cuts and eliminate a number of positions, including the city clerk.
“A prolonged loss of 13 percent of revenues would cause far-reaching and prolonged impacts on the services provided to the residents and business in a city our size,” Marsh said.
Councilmember Tina Hansen asked Marsh whether the initiative would impact the City’s current bonds, which are used to purchase such things as infrastructure for the Signal Hill Water Department. Marsh replied by saying the impact to existing bonds would be minimal, but she and Busch both agreed that the City would have trouble issuing new bonds if the initiative were to pass and may even require the City to pledge money from the City’s General Fund
“Our credit rating would probably end up in the toilet,” Marsh said.
Carol Churchill, a member of Signal Hill Community First, a 30-year practicing lawyer and former councilmember who drafted the initiative, however, said parts of the consultant’s report are “inaccurate,” mainly because of a misinterpretation of the measure’s language. She said the initiative would only affect the “sales tax, use tax and property tax,” adding that the Council would still have power over the City’s other taxes through the City Charter.
City Attorney David Aleshire and some councilmembers said they disagree with Churchill on the interpretation of the initiative’s language, adding that it would affect all city fees, taxes and assessments. Aleshire said it might take years for the initiative to be sorted out through litigation.
The city attorney said he offered to assist Churchill in drafting the initiative to make it conform to the author’s intent, however Aleshire said she declined.
“Initially, what we heard was this was a measure that was designed to deal with development projects and incentives for development,” Aleshire said. “Clearly, the way it’s written, it goes far beyond that … Right now it’s real unclear how this will all settle out in terms of the interpretation.”
Councilmember Hansen, who pointed out that she works as a criminal attorney, said the language is “clear” that the two-thirds voter approval requirement applies to all city charges, regardless of the author’s intent.
“I think, just reading plain English, it’s very clear at this point that it applies to everything– any fee, any charge,” she said. “We can argue about it all day long. Anybody can talk about [his or her] opinion of what it should have been or did mean, but to me, if you read the plain English, the plain English says it has to be two-thirds vote.”
Vice Mayor Ed Wilson noted that the consultant drew his own conclusion of what the initiative’s language means without any influence from the City, adding that the main goal of the analysis was to look at the fiscal impact, not the legal ramifications of the initiative.
“Everyone who reads something sees something different, [and] that’s what laws are about. That’s when you get into the interpretation,” Wilson said. “We specifically asked them to read the language in the initiative. As an independent third party, they’re looking at it, not me. From their perspective, this is what it means. It’s not someone who has a vested interest one way or another.”
Councilmember Lori Woods said she appreciated the consultant doing a “thorough” report and said the information could be useful for years to come.
Regarding the consultant’s report, Aleshire added that the firm made its own first-impression interpretation of the initiative and at no time during the analysis did the consultant contact the city attorney’s office or the Council for clarification on legal interpretation.
Churchill said, however, that assertions the initiative would put the California Crown assessment district up to a citywide vote are false, since the district is protected under the California constitution through Proposition 218, which requires that property owners impacted by a specific assessment increase have a right to protest.
Aleshire disagreed with Churchill’s statement, adding that Proposition 218 doesn’t prohibit charter cities from imposing restrictions that go above and beyond what the state law requires.
Churchill said the intent of the initiative is to give taxpayers a right to vote on whether tax dollars should be given to developers as incentives for development, stating that the consultant’s report failed to mention the City’s economic-development ordinance that was passed after the State abolished redevelopment.
“This initiative is only applicable if this council says the residents of this community have to take money out of their pocket to give to the developer,” she said. “You are free to spend your money any way you want and make any type of developer incentive as long as you’re not asking the taxpayer to put something on their property-tax bill as a way of an assessment district or as a new property tax or some type of a property-related fee that is not exempt under Proposition 218.”
Maria Harris, also a proponent of the initiative and a member of Signal Hill Community First, conferred with Churchill, stating that the goal of the consultant’s analysis was to “communicate frustration and rigidity” and was an attempt to “distort the facts.” However, Harris did offer to “work out a mutually agreeable path to follow.”
Though Aleshire said the proposed initiative as it is currently written cannot be changed or stricken from the ballot, he said the Council still has the option of drafting an alternative measure to fix any inconsistencies and work with Signal Hill Community First to devise a preferred measure.
In a phone interview with the Signal Tribune, Churchill said the group is open to working with the City on an alternative initiative, but it would have to come from the Council.
“We are open to sitting down and discussing it with them, but it’s up to them to draft an initiative that accomplishes the goals of the residents,” she said. “But you need to understand, they don’t want to accomplish the goals of the residents– they want to have complete control over taxing and raising funds at the cost of the residents.”
Other Council highlights
Stormwater ordinance The Council voted unanimously (5-0) to approve an urgency ordinance to amend city code as it relates to stormwater and urban-runoff pollution prevention controls to comply with the new MS4 NPDES Stormwater permit that was adopted by the California Regional Water Quality Control Board on Nov. 8, 2012 and became effective Dec. 8, 2012.
Conservation Corps The Council voted unanimously (4-0) to authorize the city manager to extend the contract-services agreement in the amount of $37,500 between the City and the Conservation Corps of Long Beach to provide a corps member to supplement the public works maintenance operations program. Councilmember Larry Forester abstained.
No parking The Council voted unanimously (5-0) to approve a resolution establishing a “no parking/tow-away zone” between the hours of 10pm and 6pm on Redondo Avenue between Pacific Coast Highway and E. 19th Street. The parking restrictions are in response to business owners’ concerns over late-night activities of patrons from a local night club (Executive Suite) littering and vandalizing properties, according to a staff report.
The next Signal Hill Council meeting is scheduled for Nov. 19 at 7pm in the Council Chamber.