Westminster’s Sales Tax Increase Offers Reprieve From Crisis

The one-cent sales tax increase passed by Westminster voters in November means for the first time in years, the city won’t need to draw from reserves to balance its budget, although long-term, the tax increase won’t save the city from budget shortfalls.

City officials say the tax increase brought in an additional $2.5 million in the first quarter of 2017, and expect an additional $13.9 million in the 2017-18 fiscal year and $14.7 million the year after.

“We’ll actually be able to book a small surplus in 2017-18, for the first time in ten years,” Assistant City Manager Chet Simmons said in a telephone interview Tuesday. “It’s a good day for us.”

The City Council will vote on its 2017-2018 budget June 28.

The new budget is a stark contrast from just one year ago, when staff projected the city would exhaust its reserve fund by 2018 and potentially go bankrupt.

But the city’s pension costs are expected to increase by nearly $8 million over the next six years. By 2019 the city will begin seeing deficits again, although there will be enough money in reserves to cover it.

“While balanced, the City will need to continue to take actions internally to reduce costs, while externally supporting development and the business community to increase revenues,” according to a staff presentation.

Despite that caveat, this year’s budget includes new spending already approved by the City Council, including two new police officers geared toward homelessness, two new code enforcement officers, and a $600,000 car rebate program for Westminster car buyers.

Staff also have requested $1.01 million in additional spending, including a new police officer to help with hiring and a second deputy police chief.

Reliance on Reserves

Westminster has been in financial trouble since 2011 when Gov. Jerry Brown eliminated redevelopment agencies statewide. The agencies diverted property tax dollars toward special economic zones to reduce blight.

The city relied unusually heavily on its redevelopment agency – drawing a redevelopment zone over the entire city – meaning the elimination of their agency left a $10.4 million hole in the city’s budget and resulted in 67 layoffs.

Many of the cuts have not been restored.

The city has since depended on its reserve fund to balance its budget each year, and was projected to empty that fund by the 2018-2019 fiscal year.

Without the funds from the sales tax increase, the deficit would have been $11.4 million in 2017-18 and $13.8 million in 2018-19.

The council is likely to adopt a formal reserve policy this year which would require the city to maintain a rainy day fund equal to 17 percent of total expenditures.

Pension Increases

In Westminster, like cities across the state, the annual costs for public pensions keep rising.

The California Public Employee Retirement System, or CalPERS, is taking steps to reduce the discount rate to seven percent by 2020, effectively raising the cost of public pensions for agencies that contract with CalPERS.

For Westminster, that will mean an estimated $8.1 million increase in the city’s unfunded pension liability over the next six years, or $16.3 million by fiscal year 2022-2023. The majority of those costs are for public safety pensions.

Westminster recently established two trust funds dedicated to paying future pension costs.

Will the Sales Tax Save the Day?

The sales tax increase, which will sunset after six years, was approved by 60 percent of Westminster voters in November. 

Proponents of the sales tax initiative billed it as a necessary evil to save the city from a budget crisis that could ultimately result in bankruptcy.

Critics of the sales tax measure have argued the increase will suppress buying in Westminster.

City officials argue their sales tax projections – which assume an economy on an upward trajectory – are accurate, pointing to a study by the auditing firm HdL, commissioned by the city, which found no “measurable and ongoing negative effect” on revenue in eight cities where there was a sales tax increase.

“The data to support a claim that people will stop shopping in a city that increases its sales tax is unfounded,” Simmons said. “It’s simply not there.”

Although a majority of council members opposed the tax increase ahead of the election – Mayor Tri Ta and Councilmembers Tyler Diep and Kimberly Ho – arguing that the city should make cuts before passing a tax increase, since its passage the council has approved several new spending plans.

Earlier this year, the council approved the hiring of two new police officers to focus on the city’s homeless population as well as a contract with the nonprofit CityNet to provide homeless outreach services.

It also hired two new code enforcement officers as part of that same plan.

In May, the council approved an economic development package that included plans for the car rebate program, business improvement loans and tax incentives for hotels.

Simmons said those economic development initiatives will help increase the city’s revenue and has hired a firm, Management Partners, to conduct a $99,000 citywide efficiency study.

City staff have also requested nearly $1 million in new spending next year, including the addition of six full-time positions, one part-time job and upgrading a part-time position to full-time.

That includes a senior administrative analyst for the city manager’s office, three new positions in public works, and a part-time building inspector.

Police Chief Ralph Ornelas is also requesting a new police officer to help with administrative duties and the addition of a second deputy chief position.

The deputy chief role has remained vacant after the last two officeholders left to become police chiefs for other agencies: Tim Vu to the city of Alhambra and Dan Schoonmaker to Poulsbo, Washington.

Contact Thy Vo at tvo@voicecofoc.org or follow her on Twitter @thyanhvo.

  • Bob Brock

    3@50 just isn’t good enough. We need to start hiring firefighters at 18 years old at a minimum of $500,000 and let them retire at 25 for 99% of their pay for the rest of their lives. If we don’t, we’re not going to have any firefighters in Westminster.

    • LFOldTimer

      Only about 1% of the calls that Orange County firefighters respond to are fires. So calling them “firefighters” is really a misnomer.

      We could hire private EMT’s who would work at half the cost of the ‘firefighters’ to respond to medical emergencies and not lose an ounce of quality. In fact, we may gain some quality.

      It would save a tremendous amount of money for the City of Westminster and might even dig them out of their financial hole – but the politicians would lose their public safety campaign donations and endorsements. So it would never happen.

      When we have wildfires in the forests it’s mainly the prisoner populations that do all the manual labor to fight the fires. The paid firefighters stand around with their hands in their pockets and supervise the inmates while stuffing their pockets with taxpayer dollars in OT.

      OCFA got rid of most of their volunteer reserve firefighters because they were cutting into their overtime. And, as you’ve read in the newspaper lately, the OT costs for OCFA has shot through the roof. 44 OCFA firefighers made over twice their salaries in OT. The OCFA union was behind it, as you can surmise. The fire departments show total contempt for the taxpayers. They rip us off at will. And the politicians do nothing to stop it because they walk in lockstep with the robbers.

      • westminster_guy

        “Only about 1% of the calls that Orange County firefighters respond to are fires. ”

        Do you have a source for that 1% stat? First time I’ve heard that.

        • LFOldTimer

          Think about it. How many fires as opposed to medical calls does OCFA respond to in any OC city? Very very few. Home or business fires are rare occurrences. But OCFA fire trucks responding to senior living facilities are as common as freckles on an Irishman’s nose.

          I have actually seen the 1% figure documented in the media. In fact, there may have been a previous grand jury report from a few years ago that noted it. Do your research. You will find that medical calls FAR OUTNUMBER fire calls.

          That’s why the government should privatize EMS. It would save us tons of money. We could easily find very well trained EMS medics to work at half the cost of an OCFA firefighter. No pensions needed. A straight 401-K would suffice. And no 24 hours shifts. No more dozing for dollars (We pay you while you sleep nonsense). No more working out at the local gym while on county time. No more groups of 6 firefighters pushing a shopping cart at Ralphs buying food for tonight’s BBQ at the station.

          But the politicians won’t go for it because the public safety campaign donations are just too lucrative.

          • westminster_guy

            I don’t deny that medical calls very likely outnumber other emergency calls. I was just hoping you had evidence that it is in fact 1%, since that’s the number you chose to share.

          • LFOldTimer

            1% is the figure I read in the media.

            Now go do your own research and report back to us.

          • LFOldTimer

            Here, westminster guy. Don’t bother with the research. I did it for you.

            The 2011-12 OC Grand Jury reported the following in their “Emergency Medical Response in Orange County” publication.

            On Page 3 of the linked OCGJ report you’ll find the following sentence:

            “The Orange County Fire Authority alone reported that less than 2% of their 88,227 responses were for “Fire/Explosion”

            This statement is accompanied by a chart which shows the OCFA emergency response by type.

            http://www.ocgrandjury.org/pdfs/emergmedresponse/emergmedresponse.pdf

            Satisfied now???

          • LFOldTimer

            No response from westminster guy.

            As I suspected.

          • westminster_guy

            lol. Excuse me for having a family life which prevents me from sitting at my computer all weekend. You should try it.

          • LFOldTimer

            You don’t use your computer at all on the weekends? All your electronic devices are ignored on the weekend? lol. Right.

            Oh, and I do try it. I had a great weekend. Thanks.

          • westminster_guy

            The info is appreciated. I don’t understand why you’re so sensitive to someone asking for a source. Throw out stats and it’s going to happen.

          • LFOldTimer

            Now that you KNOW that only about 1% of OCFA emergency calls are for fires – you must agree that calling them “firefighters” is a misnomer. Right, westminster guy??

            My original premise was that by privatizing Emergency Medical Services we could save hundreds of millions of our tax dollars on personnel costs and increase the quality of our service. How?

            We could cut our costs in half by reducing salaries and eliminating pensions (replacing them with 401-k’s).

            Incompetent personnel would be fired which is practically impossible to do in a public safety union driven environment.

            What say you, wg?

  • astar2b

    What happened to all the sales tax money from Westminster mall ? ? ? Malls are dying I read…

  • LFOldTimer

    Isn’t this the way it always works in government?

    The government employees screw up and cause financial havoc (budget deficits that threaten basic public services) and the solution is always to punish the innocent taxpayers who had nothing to do with the misdeeds by raising our taxes. TOTAL incompetence and a COMPLETE refusal to take responsibility for the problems that they created. Instead of raising taxes government should lay off government workers to balance their budgets. Like private companies are forced to do when they screw up.

    Santa Ana and Westminster are perfect examples of failed municipal government systems. One corruption scandal after another.