Government tax burden

No New Tax Will Make Up for Lost Investments and Bad Management

“A government big enough to give you everything you want, is big enough to take away everything you have.”   —Thomas Jefferson

THE VENTURA BUDGET CRUNCH

[SEND IN THE CLOWNS]

“Clowns to the Left of me, Jokers to the Right, here I am, stuck in the middle with you.”—Stealer’s Wheel (Joe Egan & Gerry Rafferty)

On January 24, 2009, at 8am the City of Ventura held a special meeting at the Police/ Fire Department community room with the full City Council to discuss the city budget.  This  “public hearing” was on a Saturday and was not televised. The usual coterie was present.  The other half of the room was occupied by City personnel.

Once the current budget figures were shared with the audience, reflecting a lower projected income  of $83 million. City Manager, Rick Cole stated, “if we must, we can run this government on $83 million.”.  The projected  deficit was $12,000,000.

THE GOVERNMENT THREE STEP

[Tea Party anyone?]

First, steps forth our fine State legislature, which seeks more tax money from the citizens, with a quadruple  whammy:

  1. Raising the Sales Tax by 1%
  2. Doubling DMV registration
  3. Reducing the dependent tax credits
  4. Increasing personal state income tax by  .125%.

If you want to follow the bouncing tax ball visit the calculator on The Sacramento Bee web site to see how much more you will have to pay, if all of the proposed tax increases pass.  Fill in a few figures and voila – your new tax burden.

Here is our projection of the impact on the citizens of Ventura.   Assume 70,000 Ventura Households, an average annual income of $75,000 and that our city projects tax revenue of $7,000,000 of every increase of ½% in tax.

Cost to Ventura Citizens

State Sales Tax Increase (1%) $14,000,000
DMV 50% increase ($160 average x 2.5 cars per household x 70,000) $28,000,000
Additional Income tax ($140 per 70,000 households) $9,800,000
Loss in dependent tax credits (2 children per household) $29,400,000
Total $81,200,000
Cost per Ventura household (Total divided by 70,000 households) $1,160

Second, steps forth the City of Ventura with the local version of the sales tax.  A proposal to add ½% to raise our local rate to 7.75% from 7.25%. (Don’t’ forget the State has already added 1%, so it will be a  9.75% sales tax, if Ventura voters approve the local measure)

Ventura’s 1/2 percent sales tax $7,000,000

Now steps forth the Ventura Unified School, which is considering a real property Parcel Tax on City of Ventura residences and real property to cover their budget deficit.

Parcel Tax ($200 per parcel times 32,000 parcels $6,400,000
Recap of TOTAL PROPOSED NEW HOUSEHOLD TAXES $94,600,000
Cost per year per Ventura household in new taxes (State, City, VUSD) $1,351

A NEW TAX — THE PATH OF LEAST RESISTANCE

[The City Council with rose colored glasses]

The Ventura Unified School District (VUSD) has worked out alternative budgets that will get them through this financial crisis. With careful management, over the next two years, The VUSD can adjust and reduce expenditures by $20,108,500, making the need for a new property (parcel) tax unnecessary. Some members of the School Districts Budget Advisory Committee are thinking that it is just  easier to just get more funds from the general public in the form of a new property tax.

The City of Ventura is pursuing its own path to financial Armageddon.  Facing a $12,000,000 deficit, because income will only be $84,000,000 against expenses of $96,000,000 (they project and hope), the City manger is realistically seeking and trying to operate within the existing revenues by reducing staff and expenses.  An effort to be applauded, given the specter of five years of depression.

On the other hand the City Council has other ideas — save this fireman’s benefit, this policeman’s job, the library, the arts, the homeless etc. — programs unrelated to essential governmental functions, which they lavishly funded, and pay scales they generously promised to pay between 2003 and 2007, when our elected officials knew we did not have the money for such increases. ( See 2003 Budget Report, Donna Landeros, City Manger, Economic Overview)

The temptation to resort to the citizens and seek new taxes seems to be the politicians path of least resistance at all levels of government.  Ventura is no different.  What if instead those programs were eliminated and pay and benefits were modified , so as to allow the government to operate within their existing  tax income?   While workers in the private sector are cutting expenses, laying staff off, not funding 401K matches and eliminating raises, the public sector seem to feel they are immune from economic realities and seek more money from YOU.

Editors’ comments:

What say you, citizens of Ventura? At what point does living within our means and going back to the basics really take affect? If this is the worst economic crisis since the “Great Depression” or “World War II”, at what point does government start reducing programs and staff to only provide the necessities that only city government  should provide? Or, that only state government should provide? As long as there are economic constituencies (public employees) within government who define their own job description, bargain and politicize through unions their own pay and benefits, the citizenry will always be in danger.

CONTINUED PROBLEMS ADD TO FINANCIAL DEFICIT

While the City seems proud that it only lost $10 million in investments in 2008, they defend their loss by comparing the loss to the average citizen’s 401K losses.   Hardly a realistic comparison given that the investment policy for a municipality is  and should be much be more conservative and  restrictive.  Some at the City makes it sound as if it is heresy to suggest that they should not have lost anything.

The City Attorney on the other hand  is crying “fraud” on the part of Lehman Brother and WaMu — a distraction away from the real issue. None of the four members of the Investment Committee have investment licenses,  nor the experience and qualifications to oversee a $200 million portfolio in this current financial market. Months before the Lehman and WaMu  debacle,  the City had a prior warning of problems due to  a potential  $10 million loss they had invested with Bear Stearns.  It turned out that the Bear Sterns was acquired by JP Morgan and thus avoided bankruptcy, however at this writing we do not know how much JP Morgan is willing to pay the City of Ventura on that investment.

It is easy to raise taxes and bury our heads in the sand. It is difficult to make the tough decisions that will avoid a future disaster but we have reached the point of critical mass. The City is under funded in its pension plan by over $60 million as of 2007, which is exacerbated by the 52% drop in value of  the pension fund investments by CalPERS, the pension investment manger for Ventura. Over $362 million (Page 70 of the Comprehensive Annual Financial Report, page 102 of the PDF) is owed in future pensions and this amount is growing each year.

EDITORS’ COMMENTS

If we can’t sit back, inject humor and laugh in these hard economic times it has  truly become a” foul wind.” Hope you enjoy the humor of this.

In this current economic crisis, we had to reduce our staff. We had no laternative. RANDY HAS TO GO !

Editors:

B. Alviani         S. Doll           J. Tingstrom

K. Corse           R. McCord    T. Cook

For more information like this, subscribe to our newsletter, Res Publica. Click here to enter your name and email address.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *