Like many cities, Lompoc is facing a potential fiscal crisis. Hotels and almost all commercial businesses have been closed due to a spreading infectious disease.
With no sense of when or if the economy will return to pre-disease levels, city leaders are becoming concerned about their ability to provide tax supported city services.
Those services include police and fire protection, street and alley maintenance, park maintenance and recreational programs.
With commercial activity at a near halt and a proposal by Gov. Gavin Newsom to allow businesses to keep up to $50,000 of sales taxes collected for the rest of the year, Lompoc’s recent temporary sales tax increase may not help matters.
The General Fund budget is being hit hard: normal sales tax and transient occupancy (hotel) tax revenues to the city are sharply reduced by an as-yet unknown amount that will, according to a staff presentation on April 7, probably exceed $500,000 before the end of this fiscal year (June 30).
While the government could literally flip a switch and turn businesses off, I doubt they will be able to flip the same switch and return to normal in the same length of time. Commercial profits and tax revenues will be considerably lower for months if not years to come.
Santa Barbara, Santa Maria and Solvang have already furloughed many employees and suspended several programs to balance their budgets. City halls are closed to the public and citizens have been urged to submit their comments via e-mail or video conference call for public meetings.
When the president and governor declared state and national emergencies due to the illness and Congress passed a $2.2 trillion rescue package, it allowed local governments in California to seek “public assistance” from the California Office of Emergency Services (OES).
Lompoc has a limited reserve fund and it may soon be exhausted, and proposed OES reimbursements are limited to a yet undefined “cost of eligible emergency protective measures taken to respond to the COVID-19 emergency.”
But these requests take time to process and bills must be paid daily.
One of those bills that must be paid is the city’s share of the California Public Employees Retirement System (CalPERS) fund; the staff has previously indicated this unfunded liability was $93 million; in a report on April 7 that has now increased to $96 million.
In a staff report to the City Council for the April 7 meeting, staff reported “a current estimate on the possible increase for the City’s UAL (CalPERS), given what is currently happening in the financial markets, could be as much as an additional $35 million. This is an estimated 35 percent increase …”
The significance of this debt is that it must be paid before any other service is considered. In other words, if payments increase by 35 percent, the operating budget will have to be cut by the same amount to balance the budget.
Considering that paying the CalPERS retirement fund has nothing to do with responding to the COVID-19 emergency, the city has a serious problem on its hands.
It is hoped that other rescue packages will be available to address this crisis, but remember, since the government doesn’t earn any money, it is taxpayers like you, our grandkids and I who will eventually pay for the bailouts.
The drastic actions taken to stem the impact of the disease will be potentially felt by the nation for the next couple of decades. As long the social distancing restrictions remain in place, city leaders will continue to be challenged to provide not only essential services such as police and fire protection, but also maintain roads and provide recreational services.
Last Tuesday, the director of the County Public Health Department was suggesting the current restrictions may need to remain in place for several more months. But as Noozhawk reported on Thursday Dr. Henning Ansorg, county public health officer said during a daily press briefing:
“We continue to see an increase in confirmed cases across the county of Santa Barbara, however, the increase is following a linear pathway and has not evolved into an exponential pattern, which we initially were worried about.”
That sounds like exactly what health officials were hoping for — a “flattening of the curve” and should signal a return to normal; but will it?
A plan is needed to address the looming financial crisis; but this is a dynamic situation and it’s way too early to be trying to lay out a concrete plan because there are so many unknowns. This is the time that visionary leaders are needed and so far, I haven’t seen any evidence of that kind of leadership at any level of government in this state.
— Ron Fink, a Lompoc resident since 1975, is retired from the aerospace industry and has been active with Lompoc municipal government commissions and committees since 1992, including 12 years on the Lompoc Planning Commission. He is also a voting member of the Santa Barbara County Taxpayers Association. Contact him at news@noozhawk.com. Click here to read his previous columns. The opinions expressed are his own.