A discussion of ways to boost municipal revenue became tangled in Manhattan Beach City Council members’ diverging views over expenditures at Tuesday night’s city council meeting, likely preventing the city from placing a variety of possible taxes and fees for next March’s ballot.
Councilmember Amy Howorth and Mayor pro tem David Lesser had suggested moving forward with study of boosting the city’s transient occupancy tax (TOT), levied on guests in Manhattan hotels. But the plan failed after the remaining council members sought to combine it with staff exploring cost saving measures, including those potentially coming from the salaries and benefits of city staff.
The discussion comes as the city is experiencing a growing gap between revenues and expenditures for some of its enterprise funds, which are accounts for municipal services with associated fees that are maintained independently of a city’s general fund. In some cases, the fees that cities charge for the services have not kept pace with the amount they have been required to spend.
The fee for the city’s stormwater fund, which deals with runoff generated from rain, was fixed in 1996 at $19 and has not changed since. According to a recent report from a consultant hired to examine stormwater costs, the city would need to charge a fee of $192 to keep pace with costs.
In recent years, the city has been covering the difference with money from its general fund. Finance Director Bruce Moe projected that this arrangement will begin eating into municipal reserves by fiscal year 2019-20.
Lesser noted that Moody’s, a credit rating service, had recently downgraded the bond ratings of several California municipalities whose enterprise funds were subsidized by the general fund. He argued that addressing this growing deficit should be a high priority for the council.
“I don’t want to be a part of a council that will have as its legacy neglecting our infrastructure,” Lesser said.
A survey of residents ordered by the council showed hesitancy about a ballot measure that would boost the annual fee to the needed level. A narrow majority of residents said that their vote would be “definitely no” or “probably no,” while only 40.8 percent of voters said “definitely yes” or “probably yes.”
Howorth said that the measured opposition was not necessarily fatal. She noted that stormwater effluent frequently passes through storm drains and into the ocean, and argued that through voter education, residents’ traditionally high level of concern for the environment could power a fee increase to victory.
“This is something that is absolutely appropriate and defensible: to go out to taxpayers and ask them to raise the rates,” she said.
Nonetheless, sensing the political difficulty behind stormwater rate raises, Howorth and Lesser had moved to explore boosting the TOT as a way to generate additional funds for infrastructure needs.
While all council members agreed with the need to stabilize infrastructure funding sources, they disagreed on how to get there. The arguments mirrored those raised in June, when the council adopted its two-year budget. At that meeting, residents questioned the city’s long-term financial health. Since that time, officials with the California Public Employees Retirement System revealed considerably lower than expected investment returns, enhancing concern over future pension fund contributions by cities.
At Tuesday’s meeting, Councilmembers Mark Burton and Wayne Powell, and Mayor Tony D’Errico pointed to further data in the voter survey revealing skepticism about rate increases. Among those opposed to the increased stormwater fees, most cited a belief that either taxes and fees were already too high, or that the city government could not be trusted to handle the money it had. As a result, the trio sought to include requests for staff to examine additional cost savings in any exploration of new fees, sinking the TOT study proposal.
“To me, the first thing we need to do is tighten our belts,” Powell said. “We need to prove to the voters that we are being economically responsible.”
With a relatively brief amount of time between now and the March election, and the comparatively conservative and tax-averse electorate that usually turns out for such non-general ballots, city staff said that it was not worth continuing to explore revenue increasing measures unless unless they had the unanimous support of the council.
“We could put a measure on the March ballot,” said City Manager Mark Danaj. “The question is, can the community rise up and build the necessary support for it in that time?”
