Monday, March 18, 2024

Dejavu: Clayton City Staff Is Trying To Push Through Another Tax Increase

Shared Correspondence from the Community: We value the diverse perspectives of our readers and aim to encourage meaningful conversations. Occasionally, we may share excerpts from correspondence received from our followers or gathered from social media to promote civil discussions. While we may not always agree with the opinions shared, we believe in facilitating a platform for respectful debates. Thank you for contributing to the ongoing conversation in the comments section. Remember to keep your comments respectful and concise.

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Dear Clayton Community:

In March of 2022 it was a $200-$400 parcel tax, this time it is a 1/2-1 cent sales tax increase. (The staff must have not read Mayor Peter Cloven's $30,000 community survey in 2022, where the community said “NO’ to new taxes of any kind.) Hello, Council-members Holly Tillman and Peter Cloven.

APPROVE THE TAX OR BUST: The city manager placed an urgent item on the March 5th city council agenda for a 1/2 cent to 1 cent increase in Clayton's sales tax to be placed on the November ballot or have the city move to austerity measures to balance the budget. He presented his 5-year budget forecast that shows a budget deficit of: (-$240,000) in Fiscal Year (FY) 2024 (-$561,181) in FY 2025 (-$572,311) in FY 2026 (-$796,023) in FY 2027 and (-$875,870) in FY 2028.

CRISIS, URGENCY? Because it takes 4 affirmative votes to place a tax measure on the ballot the city manager was asking 4 councilmembers for an on-the-spot commitment to move forward with the tax measure or commit to extreme cuts in city services. He presented this as an “urgent” decision by the council because of a tight timeline to get a tax measure on the November 2024 ballot.
* Create a crisis (huge budget deficit),
* Create urgency (must be done now).
* Red flags? Sound familiar?

WAS THE COUNCIL BLINDSIDED? I read the City Manager's staff report and it was not clear he was going to ask the council to make a decision that night to move forward with a ballot measure. It appears this was a reckless, last-ditch effort to fast-track a tax increase measure. It doesn't look like he even reviewed his forecast with the Council's Budget/Audit Committee before putting it on the agenda.

Asking taxpayers to cough up more tax money is a serious matter (especially in this economy with the cost of everything increasing) and it should never be a spontaneous on-the-spot decision.

In my opinion, he put the council in an awkward position. Moreover, the city manager has been pushing for 3 tax increases for over 8 months.
1) A sales tax increase,
2) A $100-150 increase in the Landscape Maintenance District parcel tax, and
3) An increase in the real estate transfer tax.

This makes you wonder why he waited until it became an urgent matter to get it on the November 2024 ballot. He could have put together his 5 years forecast 2 months ago with his proposed tax measure to give all council members time to review the numbers and make an informed decision-but he didn't.

NO NEED TO PANIC: The good news is there is no need to panic because the city has a General Fund reserve of $7.7 million that can be used to help balance the budget until a well-thought-out solution can be reached. The reason this reserve is so large is that the city has added to it in years when revenue exceeds expenses, creating a net surplus at the end of the year.

Here is an example of historical General Fund performance: FY 2015 +$389,892 surplus, FY 2016 +$204,902 surplus, FY 2017 +$299,222 surplus, FY 2018 (-$250,810) deficit, FY 2019 +$93,674 surplus, FY 2020 +$404,425 surplus, FY 2021 (-$55,589) deficit. As you can see, the numbers jump all over the board. One could argue that in years when the city had a budget surplus we were over-taxed, so it seems reasonable, to slow down, take a "pause" and use some of the reserve money until we have a better understanding of city finances moving forward.

Therefore, we don't need to jump head-first into putting a sales tax increase on the November 2024 ballot. We should thank Councilmember Wan for pushing for a "pause", and not moving forward with a decision at the council meeting. In my opinion, this was the right decision given the uncertainty of Clayton's budget structure.

***CONGRATULATIONS, YOU HAVE REACHED THE HALFWAY POINT. TAKE A BREAK, GRAB SOME POPCORN AND A SODA, AND CONTINUE READING***

IS CLAYTON'S BUDGET DEFICIT REAL? It does appear the city has a structural budget deficit, but there are many solutions to be considered by the council to solve this problem. A tax increase is only one solution and it could be a sale tax increase, a new parcel tax, an increase in the real estate transfer tax, or a reduction in expenses.

At this point, we don't know what the real deficit is moving forward. There are so many different budget deficit numbers being floated by city staff in the last 3 years it makes your head spin. Besides, a forecast is not an exact science and as Councilmember Wan pointed out, the outcome depends on the methodology used and the assumptions made to complete the forecast.

When Councilmember Wan asked for clarification at the last city council meeting, the city manager got defensive and told him it would add no value to the process. In other words, it was on a Needs to Know Basis and You Don't Need to Know.

THE CITY HAS CREDIBILITY ISSUES TO OVERCOME: The city has a credibility gap, caused in part by The Clayton Pioneer, Peter Cloven, Holly Tillman, and C.W. Wolfe. As you may recall, the Pioneer published a ten-year budget forecast in their February 18, 2022 issue put together by former City Manager Reina Schwartz and supported by former Mayor Cloven, Vice Mayor Tillman, and Councilmember Wolff, because they wanted to push through a new $200-$400 parcel tax.

This false and misleading forecast showed a budget deficit of -$672,366 in FY 2023 and increasing to -$2,179,296 in FY 2031. It was an obvious attempt to create a crisis and garner support for their tax measure--sound familiar?

The gang was silent on the fact this forecast included $500,000 in the city manager's wish list of expenses. Peter Cloven, Holly Tillman, and CW Wolfe even voted to spend $30,000 of taxpayer money to see if Clayton voters were buying their budget crisis story.

THE PATH FORWARD: This first step is to get a handle on the real budget numbers before we try to solve the problem. The city has approved a Citizen Financial Review Committee (however, it is not officially formed yet) that will be reviewing all the expenses, line-by-line, as well as all the revenue sources.

Please let them do their job and complete their review before we jump to a solution. We have to know the real number before we try to solve the problem. As I said before, there is no urgency because we can use the reserves to handle any shortfall.

THINGS TO CONSIDER ABOUT A SALES TAX INCREASE: A sales tax increase is just one potential solution to be considered in the future, but keep in mind it will impact your budget. It is not just a tax on your bill at restaurants and Safeway, it will be applied on all your internet purchases and car purchases. Note: Tax on auto sales are "return to source taxes", it is where you live, not where you purchase the vehicle. For example, if you purchase a $50,000 vehicle it will add $500 to your bill.

BOTTOM LINE: Let the process work, slow down, take a "pause" and use some of the city's General Fund Reserve money (now at $7.7 million) until we have a better understanding of the city's budget issues and then move forward with a well thought out comprehensive solution. Keep in mind, it will cost taxpayers $60,000 or more to place a tax measure on the ballot and the city will need considerable voter buy-in for it to pass-especially in this economy.

Sincerely,

Bill Walcutt

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