If Guadalupe voters don’t approve three measures on the Nov. 4 ballot, Mayor Frances Romero said the small city with big financial troubles most likely would have to disincorporate.
Romero presented the dire picture of the city’s finances Wednesday afternoon during a meeting of the Committee to Improve North County, or Committee INC, in Guadalupe as two other mayors and additional North County residents listened.
Without the funds expected to be generated by the three measures, the city at some point most likely wouldn’t be able to pay its bills, Romero said.
“The measures really do need to pass or the City of Guadalupe, in my opinion, is not going to remain an incorporated city,” Romero said.
Remarking that “we’re not having a big spending party over there,” Romero said Guadalupe officials discovered in the spring the previous budgets “were not quite right.”
“The last 15 years our city has overallocated money from special and restricted funds for general fund use,” said Romero, who has chosen not to run for re-election when her two-year term ends in December.
Those special funds include those for water, sewer and streets, she said, recalling receiving an April email from City Administrator Andrew Carter, who was hired a year earlier.
“What he discovered is that over the last 15 years, we have transferred money from special and restricted funds at a rate of 99 to 192 percent of our administrative overhead,” Romero said. “Some people have looked at me in disbelief and said, ‘Well, how can you do over 100 percent?’ Well, in Guadalupe apparently it is possible and quite disappointing, I must say.”
The city hired consultant William Statler, a former San Luis Obispo city finance director and expert in city money matters, who determined Guadalupe should be charging those special funds 64 percent to 67 percent for administrative costs — far below what they had allocated, Romero said.
She has asked the Santa Barbara County Grand Jury to look into the city’s past financial practices.
“Every time we turn around we’re dealing with the past,” Romero said. “A lot of people say, ‘Well, gosh, you need to move on, just forget about the past.’ We wouldn’t be here with three ballot measures in front of our citizenry but for the past and but for the past budgeting practices that have gone on in this community.”
The improper accounting meant the city’s budget was $640,000 short, leading to the three measures going to voters and other steps to increase revenue and slash expenses.
This fall, the city’s voters will be asked to approve Measure V, to remove the $2,250 annual cap on Guadalupe’s utility users tax, which will remain at 5 percent. This tax is charged on water, electricity, natural gas and telephone service.
The current cap only benefits businesses spending more than $45,000 a year in utilities and removal would affect just one company in town.
“This is something that would not impact our everyday resident,” she said.
Removing the cap would generate another $100,000 a year for the city.
Measure W would replace the current business license fee with a gross receipts tax. The current fee, last changed in 1979, charges $60, $90 or $120 per year.
The proposal is to charge businesses 50 cents per $1,000 of revenue. For instance, a $1 million business would pay $500 a year. The minimum rate would be $100 for home-based business or those without an address such as out-of-town building contractors. A business based in Guadalupe would pay at least $200. This measure would generate an additional $150,000 a year in revenue.
Santa Maria Mayor Alice Patino said it appears that the City of Guadalupe essentially has been subsidizing larger businesses in the community — “and I think that’s wrong.”
An audience member expressed concern the city was trying to balance the budget at the expense of firms that provide jobs in the community, saying Guadalupe can’t afford to have employers leave town.
Romero noted that there is a cost of doing business in any community and that a business license fee of $120 for a multimillion-dollar firm doesn’t pay for police, fire and infrastructure costs.
Measure X would add a sales tax hike of one-quarter percent so Guadalupe’s rate of 8.0 percent would climb to 8.25 percent, matching Santa Maria’s.
If this passes, it would generate $62,500 a year in revenue.
“We cannot continue to take money out of special restricted funds so that’s why these measures are so important,” she said, adding the funds generated by the measures indirectly will help public safety.
With a population of 7,080 residents, Guadalupe ranks at the top or bottom of many demographics for cities in Santa Barbara County, Romero said in quoting U.S. Census data. For instance, the city is No. 1 in the county for average household size (3.91 compared) and percentage of households with kids (nearly 50 percent). The per capita income is Guadalupe, at $13,647, is the lowest. Solvang ranks No. 1 with $39,139. Likewise, median family income is $44,965, compared to $96,719 in Buellton.
Guadalupe also has the lowest high school graduation rate, lowest median home value and highest number of families in poverty.
“When you start looking at these numbers, you start realizing that our city does not have a lot of means,” she said. “Some people find it offensive when you use the word poor. The reality is the numbers don’t lie.”
Guadalupe also is the lowest city for local sales tax per capita with $44, compared with the average of $224 for cities in the county.
These measures put before voters are just one avenue the city is using to solve its troubles. Employees from the top also agreed to 5 percent pay cuts, Romero noted.
A few years ago, under interim city administrator Tim Ness, Guadalupe reached out to local businesses to encourage them to pay sales taxes, boosting the annual number from $150,000 to $200,000 annually.
The newest financial problems have prompted a lot of questions, Romero said, such as why the annual audit didn’t address the issue although the review likely wouldn’t spot it. However, the audit for the last 15 years noted that the solid waste fund operated with a negative fund balance and recommended hiking rates to solve the problem.
“I cannot answer why multiple councils before us have not addressed this other than the fact maybe it’s too hard to ask people to take a rate increase,” she said.
The fund now has a deficit of $232,000 and the city is poised to raise rates while making up the deficit over a nine-year period to avoid a large rate hike. The proposal would bring a monthly increase of 30 to 60 cents for customers.
Romero said she often is asked what regulatory agency oversees the city.
“Well, the regulatory agency that oversees cities sits right up there,” she said, pointing to the council dais. “That’s really where the buck is supposed to stop on things of this nature.”
The city has been audited by the Santa Barbara County Association of Governments, Romero said, adding that she expects other audits in the future.
Romero told the Committee INC that most cities wouldn’t ask the grand jury to investigate their finances.
“Normally you want those folks to stay away," she said, "but I really feel that things being done properly in Guadalupe outweigh the embarrassment of what others have done before me.”