Santa Ana’s looking at millions of dollars in financial losses from the coronavirus public health crisis, just as officials are preparing a new budget that proposes to increase public safety spending by $13.5 million — largely driven by the police department and controversial pay raises sworn and non-sworn personnel were granted last year.
The city has taken $12 million in losses this fiscal year due to hits to sales taxes, hotel visitors’ taxes, parking fines, and other revenue streams from special collected fees, according to Finance Director Kathryn Downs, speaking at the City Council’s Tuesday, live-streamed meeting.
Downs said the city estimates $25.6 million in losses across those same revenue streams during the next fiscal year, due to stay home orders and social distancing restrictions on public interactions that have affected the city’s local economy of restaurants, retailers and other businesses.
And staff say there’s much cost-cutting to do, with measures like accelerating the “separations” of some employees, as well as salary and benefits renegotiations with the city’s employee unions, on the table. In light of the projected financial hits, Downs said “it looks like we’re going to have to pursue some of those.”
The city has already stopped hiring new employees and council members warned of potential furloughs.
Meanwhile, next year’s budget proposal so far includes a $13.5 million increase in public safety spending across the city’s police department and a contract with its regional firefighter services provider, the Orange County Fire Authority (OCFA).
The police department accounts for a lion’s share of the city’s spending of taxpayer dollars. Under the proposed budget for next year, the city will spend more than $327 million out of its taxpayer-funded general fund, with nearly $141 million of it going to the police department – the largest amount among all city departments.
The $141 million proposed for the police department next year is a $9.7 million increase from what it got this year.
Asked by Councilwoman Ceci Iglesias what was driving that increase, Downs said approximately $4 million of it accounted for the police department raises that the City Council approved last year.
Downs said police department employees would “certainly” be subject to the possible salary and benefits renegotiations staff anticipate having with the unions ahead of the next budget taking effect. Council members echoed her comment.
Councilman Phil Bacerra said none of the employee unions should be off the table. “I would hate to have somebody believe that somebody is a sacred cow to be protected … we need to live within our means.”
“We do need to look at all our labor agreements and ask the question are we certain we can fund them a year-and-a-half from now?” said Mayor Miguel Pulido. “We ought to potentially consider rolling things over for a year and if we have pay increases coming up in July, as painful as it is to say, we need one-year breather, an extension, something to buy us enough time.”
Council members also expressed frustration with the Orange County Board of Supervisors, which was split during its Tuesday meeting on how to divvy up $554 million in federal relief money it got this month between local cities and small businesses.
“I just really am puzzled by some of the moneys intended for cities and we have to wait for those funds to come to us and practically have to beg another agency to help us,” Councilman Vicente Sarmiento said during the meeting.
Pulido said the pandemic marks a stark contrast to where things were in Santa Ana at the start of the year: “The City Manager was balancing the budget in her sleep … it was so easy.”
Compare that to now, he said. “Right now, there are sleepless nights.”
Fiscal Oversight Committee Voices Concern Over City Spending of New Tax Money
On top of the city’s impending financial woes, Santa Ana’s council-appointed commission overseeing the use of sales tax increase revenue dropped off its March 6 report at City Hall.
In the report, the committee said officials are spending much of the city’s voter-approved sales tax increase money toward the “status quo” of paying off the city’s large public safety costs, much more than it’s spending on other key quality of life improvements as promised to voters.
Just a few months after voters in 2018 approved the sales tax increase, known as Measure X, City Council members approved $25 million in raises, spread over two and a half years, for police officers in the city. In justifying the move, officials at the time pointed to the additional $60 million the city expected to earn from the tax hike.
Members of the committee set up to oversee the city’s use of the new tax money, known as the Measure X Citizen Oversight Committee, in their report call for officials to narrow the criteria for allowable spending of the dollars.
According to the ballot language of Measure X, the additional $60 million in city revenue would go to public safety and be used for homelessness response, fixing streets, maintaining parks and youth and senior services, and “unrestricted general revenue purposes.”
But that last part, committee members say, allows city officials to spend the money on “a wide variety of functions,” and that may account for why more hasn’t been used for non-public safety uses.
“Residents feel that the intended purpose of the tax revenue may be misplaced and they would like to see some adjustments in upcoming budget cycles to more align with the specific items referenced in the ballot language besides unrestricted general revenue proposes,” the report reads.
Ongoing sales tax revenue “is largely keeping the status quo, instead of improving the quality of life for Santa Ana residents,” committee members said in the report.
Councilman Phil Bacerra on Friday said “when I hear people say that the money is going to the police — if you read the language of the ballot measure of Measure X – it was definitely meant to go to police and fire.”
But he acknowledged that “what people want to see with Measure X is that it doesn’t go exclusively to police and fire.”
This fiscal year, police accounted for $131 million of the city’s spending. By comparison, Parks and Recreation accounted for $22 million, and libraries accounted for $5 million.
The committee in its report said youth and senior programs are one “area that appears to not have received Measure X allocations,” despite the fact that’s one area the city is legally bound to fulfill because it was included in the ballot language voters approved.
Reached for comment, City spokesman Paul Eakins in an email pointed to a report to the committee from Downs, which outlined the city’s spending of the new tax dollars. In that report, none of the money was shown going to fixing streets or senior services in staff’s breakdown of the spending.
Staff in that report said “other General Fund revenue will provide for the expenditures in excess of Measure X revenue.”
Councilman David Penaloza in a phone interview last Friday said he agreed with some of the committee’s arguments that more could be done with the tax revenue to fill in budget gaps. “That is a valid point and I would agree with that.”
But he maintained that one portion of the ballot language for 9-1-1 response is seeing results. He pointed to an email he received from the police chief claiming response times have been reduced this year by comparison to last year.
“We’ve been able to hire and retain police officers,” Penaloza said, crediting the police officer raises granted early last year. “It’s helping keep officers on the street.”
Carlos Perea, one member of the oversight committee, said going forward, the city’s departments need to make clear goals outlined in writing for how the new tax money will be spent.
He also voiced fears that any recession as a result of the coronavirus pandemic will likely result in cuts to programs for which the sales tax money is meant to be earmarked.
Bacerra said the upcoming fiscal budget for next year “is not set in stone, and as we discover the real true impacts of the pandemic, on our economy, you’re going to see us have to make some adjustments — what those will be, I don’t know yet — nobody has a full sense yet.”
Perea said he understands there are going to be some “hard decisions” to be made.
But he said programs that have already been specifically approved by voters to receive tax money — like youth and senior services — “shouldn’t be cutting costs knowing there’s already funding meant to go there.”
Brandon Pho is a Voice of OC staff writer and Report for America corps member. Contact him at email@example.com or on Twitter @photherecord.