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Orange County Voices : COMMENTARY ON GOVERNMENT : Revenue Losses Continue to Force Tough Decisions on Cities : Some, such as Stanton, would face catastrophic effects if a recent court decision results in loss of funds from utility taxes.

November 05, 1995|SAL SAPIEN | Sal Sapien is a Stanton city councilman and former mayor. and

As a longtime resident of Orange County and as a local elected official, I would be the last person to advocate or defend taxation or fee increases that would impact the pockets of my city's residents. But in life, there are always two sides to any story, and, of course, there is another side to this story that is of interest to cities across Orange County.

As a city councilman representing the interests of the community, I see my role as providing the essential services that make my community what it is. Frequently, I hear from fellow citizens who demand that we provide better police protection, repair our streets, get rid of the prostitutes who stroll Beach Boulevard, or rid the community of all drug activity. The general perception is that local government has independent means and an inexhaustible treasury. The fact is that a city is made up of the residents who live and work there, and it exists only to provide essential services. All revenue is used exclusively for this purpose.

City revenue is limited, and the ability to increase or expand such a resource is even more so. The services that a city provides have a price tag, and regardless of need, services are directly tied to revenue. The demand is not reduced as revenue decreases. The city cannot limit or increase production. It cannot raid the treasuries of other entities. It cannot print its own money. It cannot promote sales or delay payments. Neither can its services be interrupted or delayed. Over the last six years or so, California cities in general and Orange County cities in particular have suffered as a result of factors beyond our control. These include the lingering recession, California's budget crisis, the rising costs of goods and services (particularly in public safety), and, to make matters worse, the incredible debacle of the Orange County bankruptcy.

Since Proposition 13 passed back in 1978, and other revenue-limiting measures have been adopted, California cities have focused on economic development with the goal of attracting major retailers, which generate sales tax dollars to replace lost revenue.

In a healthy economy, sales taxes "ratchet up" on an annual basis, keeping pace with rising costs due to inflation. However, in a recessionary period these revenues tend to decline, creating a widening gap between service costs and available revenue.

Compounding the problem of declining sales tax revenue has been the state's response to its own budget problems. Rather than reducing expenditures and/or increasing tax revenue, the legislature has chosen to balance its budget on the backs of cities. Since fiscal year 1991-92, the state has diverted hundreds of millions of dollars permanently. In the case of Stanton, this amounts to nearly $900,000 per year. How many small businesses can absorb such a loss yearly?

Over the past few years, my city has responded by instituting a number of measures designed to contain costs. These have included reorganization, reduction in staff expenditures, reduction in service levels, lack of salary increases for four years, reduction in maintenance efforts and deferral of necessary capital projects.

The city has also adopted strategies designed to recover costs of providing services to the users of those services. All of these measures are the typical solutions suggested by the citizens. As a result, Stanton has the fewest employees per capita in the county. City employees are the lowest paid in the county. Each of our department heads wears two or three hats.

In 1993, having already instituted all the available cost-containment measures, my city was faced with a budget deficit in excess of $1 million. The City Council had to make a difficult choice between unpopular alternatives:

1) Drastically reducing protective services to the point where safety would be severely compromised, or

2) Enacting a local utility tax, thereby allowing the city to continue the services that protect the lives of our residents. We chose the latter.

It is unclear whether the recent Santa Clara decision by the state Supreme Court upholding the constitutionality of Proposition 62 will have an impact on the utility taxes enacted by cities. According to some legal advisers, the decision means that the adoption of general purpose taxes requires a majority vote of the residents of the city.

What is abundantly clear is the catastrophic effect that will occur in our community if the funds from the utility tax are not available to finance services, and revenue losses to Stanton alone are estimated to be $1.5 million per year.

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