By Paul Myers @PaulM_SGN
EXETER – Exeter’s deficit spending is becoming a critical problem according to city manager Adam Ennis.
Two weeks ago at their Oct. 23 meeting the Exeter City Council received a update on the City’s finances, and what they can expect moving forward. One message was clear by the end of it all: the City is reaching a point where they can not keep cutting expenses and they need to increase revenue.
In June the city council passed a two year, 2018-19/2019-20, budget. The first year was balanced, while the second year is still expected to carry a slight deficit.
“To bring the budget closer to being balanced expenses were cut, including reduction and maintenance of low levels in staffing along with maintenance and capital improvement deferred for facilities,” a city staff report read. “As a result, the City’s reserves have been exhausted to a critical level.”
The city staff report added the enterprise funds should be the “backbone” of the city’s budget because they are funded by sustainable rates and not affected by the economy.
Since before Ennis assumed his position as city manger in June, the City had decided to take a deep dive in their water fund. According to Ennis the water system is one of the City’s largest concerns and the city council has directed staff to focus their efforts on improving it. A master plan for the Exeter water system is currently underway. The plan is intended to give city administration a full scope of the work needed to fix the current system while providing suggestions for more water storage and water needed to accommodate growth. But the sewer fund is not without its problems. Ennis says the sewer system needs maintenance for its lift stations and plant components.
The rate customers have to pay for the service is intended to fund the entire system. Ennis says through master plans existing deficiencies and needed repairs and modifications of the systems will be identified, capital improvement programs developed and costs prepared.
“Once the data is collected it can be analyzed to determine what rate is needed to sustain what rate is needed to sustain a reliably functioning system into the future,” a city staff report noted.
The City will have to introduce a Proposition 218 process where all property owns will have the opportunity to oppose a utility rate increase. Fifty percent plus one land owners would have to formally protest an increase for it to fail to reach the council. Otherwise the city council could vote it down.
While the City looks to increase revenues for their enterprise funds, they are also looking to increase revenues for their general fund, where they are most vulnerable. City staff reports note there is potential to add revenue to the general fund by adjusting some fees the City currently charges and identifying some places where revenue have not been collected.
Already, city staff has identified there may be a significant number of Air B’nB businesses that have not payed for a business license or a transient and occupancy tax. There is also the possibility that revenue grows with the improvements to infrastructure. According to an administrative staff report, staff will be improving the development process and affirm that fees cover costs and don’t unnecessarily draw from the general fund. They have also begun the process of evaluating landscape and lighting district rates so they are sufficiently covering their own costs.
City staff expects enterprise rate adjustments and general fund adjustments to be completed by spring 2019 before they look into sales tax measures to increase general fund revenue.
“Right now the City of Exeter does not have a local sales tax measure but other surrounding cities do have one,” Ennis said.
Farmersville, Woodlake and Lindsay all passed either full or half per cent sales tax measure in 2017 to bring their sales tax rate in line with most Tulare County cities at 8.75%. Visalia’s Measure N passed in November of 2016 and brought their sales tax rate to 8.5%. Each measure for their respective cities was promised to bring in hundreds of thousands of additional dollars to the general fund. Farmersville expects to brining in $300,000, while Woodlake is expecting $400,000 and Lindsay was projecting $900,000 over the course of the first year when it passed in June 2017.
“There are many advantages to a local sales tax measure such as, all money collected goes to local needs, the funding can be shifted with needs as they may change in the future, and the community can have direct input and oversight into the decisions made regarding the funding,” Exeter staff reports read.
Ennis said during the Oct. 23 meeting there would be an oversight committee established if the public approved a tax measure in the 2020 election.
Lindsay, Woodlake, Farmersville and Visalia have spent their extra dollars on things they had lacked relating to the general fund. Most invested in their public safety departments that often make up about 60% of the general fund budget. In addition to public safety Woodlake worked to establish a recreation department.