SLT City Manager's report -- March 22, 2008

CITY OF SOUTH LAKE TAHOE
Electronic Version

March 22, 2008

MANAGEMENT OBSERVATIONS

Is it the truth?
Is it fair to all concerned?
Will it build good will and better friendships?
Will it be beneficial to all concerned?
Rotary International “Four-Way Test”

In this Edition:

State Budget Update
City Budget and Outreach
Lukins Water Update
New RDA Project Area Answers
Gangs and Graffiti
Tahoe Transportation District Reorganization
Collections Way Up


STATE BUDGET UPDATE

The Governor and the Legislature continue to talk about and deliberate on ways to cut the State’s $14 billion+ budget deficit. There is not yet a clear picture of what the impact of State cuts will mean to local government, and this situation must and will be monitored. Schools have been targeted for cuts, and road funds that go to cities and counties have been proposed to be “borrowed.”

Proposals by the Administration to release 22,000 prisoners into the community on a new early-release program ran head on into a proposal by the Legislative Analyst’s Office to cut safety sales tax to all cities and transfer the dollars to County Probation Department.

At the last hearing on the matter on March 12th before the State Senate’s Budget Subcommittee, State Senator Mike Machado, a Capitol veteran and the League staff present made the points already made by this office and others.

“Senator Mike Machado (D-Linden), subcommittee chair, pressed the Department of Finance representative about the quality of the Governor's proposal to release 20,000 inmates with non-serious, nonviolent drug and property crimes from state prisons. The LAO realignment proposal is intended to provide probation services to assist the transition of these 20,000 inmates into local communities.
The League testified that the LAO proposal has a policy disconnect because it would take money from cities currently dedicated to front-line law enforcement and public safety programs and give it to counties for probation services. It is highly likely that if 20,000 prisoners are released into local communities, there will be a significant and direct impact on local law enforcement. “

While many city revenue sources are protected by Proposition 1A and tax increment funds for RDA’s are constitutionally protected, city officials and interested persons must carefully monitor the deliberation on the State budget and its potential impacts on local governments.

CITY BUDGET OUTREACH AND PRECAUTIONARY STEPS

City government is not immune from State budget cuts and perils in the economy. In addition, City government wants to get the word out to the community about the City budget and ensure that there is outreach made to the community as part of the budget process. In April 2008, City staff will provide to the City Council and public a mid-year budget review of all City revenues and expenditures to date.
The following actions have been taken or are planned to be taken in approaching the mid-year review:

1. Estimate revenue conservatively and limit spending where possible.
2. Developed a City Budget 101 video that is available to the public and interested groups to explain where the City gets and spend public dollars.
3. Develop a budget outreach and education program to solicit more community involvement in the process.
4. Monitor closely the State budget situation and take affirmative steps to protect local revenues while recognizing that structural reform in the State budget is needed
5. The City Manager imposed a hiring freeze for all non safety personnel except in cases where job offers had already been made and relied on by job applicants or the position is critical to ongoing operations (e.g. IT).
6. The City Manager is evaluating staffing and reorganization issues that will be reported to the City Council during the budget process as a means of reducing overall spending.
It is clear when one examines existing City fixed costs (salaries and wages, debt service, insurance etc), existing City infrastructure needs, and proposed projects contained in the Strategic Plan that there is insufficient new discretionary revenues available to maintain the current levels of service and undertake, complete and maintain all proposed strategic plan goals and objectives. Several steps are needed.

• Priorities have to be set for the level of City services provided and the dollar resources committed to these services.
• While containing spending, growing the local economy must be the number one priority. Making it possible for small businesses to survive and grow, diversifying the local economy by encouraging and supporting initiatives to bring new higher paying and environmentally friendly jobs into the community, making the City’s infrastructure available and attractive (curbs and gutters, sidewalks in high-traffic area, lighting, streets, drainage etc), attracting new commercial businesses needed and desired by the community (instead of encouraging the flight to shop out of town), and increasing the number of visitors all could make a difference in the lives of residents, the availability of jobs, the profitability of big and small businesses and revenues to City government to provide services. Economic development cannot be treated as just another option…it is an imperative without which we will falter and fall back into hard economic times with cuts in staffing and community service.

LUKINS WATER UPDATE
City staff and Lukins Water CEO met in late 2007 to discuss the status of the water system and improvements needed to ensure adequate flow for domestic and fire protection purposes. Mr. Lukins agreed to conduct a survey of his customers to determine their level of support for improvements, and he recently said that the customer survey will be going out in March. He also said he was pursuing certain water grant funds for system improvements.

Earlier this month, City staff and I met with staff of the State Public Utilities Commission to discuss system needs and improvements and assistance that the State PUC can provide. PUC staff acknowledged that the Lukins system needs major repairs. A copy of the Brown and Caldwell study done by the STPUD that described needed improvements was provided to them again. PUC staff suggested that the system improvements be broken down into segments that could be financed and made over time rather than expecting the company and all parties to tackle at one time the $18+ million in improvements needed to upgrade the entire system. PUC staff said they were meeting with Lukins management as well to approach this matter.

City RDA staff have now identified a grant program where up to $1 million could be secured annually (on a statewide competitive basis) for major infrastructure improvements and staff will be working with Lukins to identify the first improvements needed and propose application for these grant funds in the next calendar year. Lukins officials too need to step up bring forward an improvement plan for the system. City staff is also examining the ways in which a new RDA Project Area could provide some funding to make improvements so that the 900 plus customers of the system do not experience “rate shock” that drives them out of their homes.

NEW RDA PROJECT AREA QUESTIONS AND ANSWERS

At a recent meeting of the Citizens Alliance that I attended, a number of important questions were raised about the proposed redevelopment project area that is being evaluated and will be considered by the City Council later this year.

Here are the questions and answers below:

Eminent Domain – The RDA plan now being written by staff for presentation to the City Council later this year will not propose the power of eminent domain for the new Project Area. The question was asked if a future City Council decided it wants to amend the plan to include the power of eminent domain, will the Agency have to again justify that blight exists?

Answer – Yes, in order to amend a redevelopment plan to include the power of eminent domain, a future City Council will have to find that significant blight remains in the Project Area and that blight cannot be eliminated without the use of eminent domain. In addition, the redevelopment plan would have to be amended which is a long and expensive public process.

“No Eminent Domain” Affirmation – A suggestion was made that if the City Council is truly opposed to including eminent domain in a new redevelopment project area then it should clearly state its intentions now.

Answer – The City Council passed a resolution stating its intention to eliminate the RDA’s power of eminent domain in a new project area at its meeting of March 18, 2008.

Project Area Committee (PAC) – A question was raised whether a Project Area
Committee (PAC) is needed for the proposed redevelopment project area.

Answer – A PAC is not needed for the new redevelopment project area plan because the Agency will not have the power of eminent domain to acquire residential properties. The RDA Agency would arguably need to form a PAC in connection with amending the plan in order to authorize eminent domain authority if a substantial number of low or moderate income persons resided in the project area and the amendment would grant eminent domain authority with respect to property on which any persons reside. The proposed plan could include a requirement to form a PAC in connection with any amendment to grant the Agency eminent domain authority.

Tax Increment Calculation – Does the calculation used by the City for the growth of
tax increment over time count the 2% Proposition 13 Allowable Annual maximum?

Answer - The tax increment for the Project Area will include the 2 percent inflation adjustment, plus value changes from ownership changes and new development. Prior to 1994 when AB 1290 was passed, taxing entities could elect to get tax increment from the 2 percent growth. This occurs in the existing Project Area. That was replaced by the statutory pass through payments that this Project Area, if approved, will need to pay.

Estimate of New Revenue to the RDA - How much new revenue is estimated to come to the City RDA if a new redevelopment project area is formed?

Answer - The RDA’s financial advisors are working on tax increment and other financial projections for the Preliminary Report. They are examining the estimated cost of public improvements and the amount of tax increment revenue to be received.

Plan Adoption – Under State law may the City Council place an ordinance adopting a redevelopment plan on the ballot to be confirmed by the voters?

Answer – State law establishes a statutory scheme for approving redevelopment plans. Legal counsel has confirmed that the Law does not appear to authorize the City Council to place an ordinance adopting a redevelopment plan on the ballot to be confirmed by the voters. However, any such ordinance adopted by the City Council is subject to referendum.

GANGS AND GRAFFITI

In recent weeks, areas in the City have been hit with graffiti and our local schools have had increased levels of anti-social behavior on campus. Police officials and City leaders continue to work with school officials to respond to anti-social activity on campus and are reflecting on other steps that can and should be taken.

This City government and the community cannot and should not tolerate graffiti or emerging gang-related activity. Both are insidious activities that unless stopped can grow and destroy the fabric and reputation of a community. Graffiti and gang-related activity is not just a police problem. It is a community problem that requires the focused attention and assistance of City officials, police, school officials, churches, probation departments, the courts, neighborhood associations, and community social organizations all whose leaders state in their actions that such activities are not acceptable nor will they be tolerated in our community.

I’ve instructed the Police Chief to examine with the City Attorney the City’s existing anti-graffiti and anti-gang ordinances to see if they are strong enough. I have asked him to particularly focus on the development of ordinances that require more parental responsibility for the actions of their minor children and determining whether a curfew is needed during certain times of the year for underage children, Over the next several weeks and months a dialogue with all interested parties needs to take place to clearly identify the problem and devise an articulated and comprehensive strategy to attack it. The Police Department will also be seeking special funds from the State to move forward with a comprehensive program, but with or without these funds, a comprehensive program will be developed.

I will be having the Police Department provide the City Council and public with an overview of this situation in April and bring forward recommendations for additional action at that time.

TAHOE TRANSPORTATION DISTRICT (TTD) CHANGE UNDERWAY?

According to the Assistant City Manager, members of the Tahoe Transportation District are considering a reorganization that would make the District more independent and have its own staff so that it can focus attention and energy on the delivery of on-the ground transit services to the Basin. The notion of a strengthened transportation delivery agency in the Basin has conceptually been approved by the City Council in the past as City government officials look beyond transportation planning to transportation implementation. If we are move toward a more “green” community and one that offers various modes of transportation opportunities other than vehicle (bicycle, pedestrian, bus, airlines etc) focus and attention by an invigorated transportation planning agency will help.

Before the TTD and TRPA vote on a change, I will have the matter of reorganization brought before the City Council for review and direction so that the matter and idea is publicly vetted.

Even with a strengthened transportation agency, City government will continue to own its own fleet of busses and the City Council will continue to make annual decisions on how State-restricted TDA funds are spent for the benefit of the 24,000 people who reside in South Lake Tahoe.

COLLECTIONS WAY UP

The Director of Finance reports that the collection of business license and transient occupancy tax payments owed the City are at an all-time high.

The Finance Department mailed out 3,245 business license renewal forms. As of March 17, 2008 only 31 or .096% are believed to be open and unpaid. TOT collections are also high. With the City generating over $10 million in TOT dollars annually, TOT is a significant source of revenue. There are 144 TOT-reporting properties per month, and as of March 31, 2008 there are 6 properties that failed to report and pay TOT and 7 properties that need verification that they are being used for long-term rentals and exempt from TOT payments.

Business owners and operators who intentionally do not pay business license, TOT and other fees owed the City are being pursued civilly and where fraud may be involved they are being pursued criminally.

The vast majority of business owners and operators in South Lake Tahoe pay their business license and TOT owed the City in a timely fashion, and we appreciate it. We have a great resource of responsible business owners and operators in South Lake Tahoe. The Director of Finance and her staff continue to do an excellent job of managing City finances and collecting dollars owed City government.



DAVID JINKENS
City Manager