CARLSBAD — Hours of presentations, reports and public comments have left Carlsbad City Council undecided on how best to address revenue issues during a four hour meeting April 20 at the Faraday Center.
On the table were potential tax increases and the legalization of recreational cannabis, but the council did not support either option. Instead, council members talked about other ways to cut the budget before city spending exceeds revenue, but provided no formal direction to city staff.
The board also heard the results of its recent random survey about a one-cent sales tax increase or the legalization of cannabis. According to Tim Carney of Finding True Northwho conducted the survey, 57% of the 894 respondents were in favor of raising taxes.
As for the cannabis survey, Carney said 41% supported legalization, 38% no and 20% were undecided. However, 74% were in favor of a cannabis tax.
Councilwoman Teresa Acosta said a sales tax increase would be regressive, especially for low-income residents. A new tax would impact a larger percentage of their annual income, Acosta said.
However, the council unanimously agreed that it did not want to raise the sales tax and cited concerns such as inflation, the high cost of living and the impacts on low-income residents.
“I don’t approve of this $20 million tax when you as a city are mismanaging our funds,” resident Elle Arkins said. “You spend more than you earn. We seek to affect people on fixed incomes and people on low incomes who are struggling.
Mayor Matt Hall asked staff about the number of new hires in recent years and the associated costs, but staff did not have those figures available. However, the city has hired between 70 and 80 new full-time employees over the past four years.
Hall voiced opposition to hirings and sometimes voted against draft or final budgets. Additionally, the city is also in contract negotiations with the Carlsbad Police Department and has $85.9 million of unfunded projects on the books.
Additionally, newly enacted or changed state laws, such as the Organic Waste Act, have resulted in additional costs for cities.
Another challenge is the city’s pension obligation, to which it contributes a significant amount of funding. A continuing point of contention is how the state calculates its expected returns on retirement investments. Cities have long complained that state estimates are way too high and are generally lower than forecast, leaving cities on the hook to make up the difference.
Over the past five years, Carlsbad has contributed $56 million to its pension debt obligation.
To address all of these factors, Zach Korach, the city’s chief financial officer, said each city department is currently cutting budgets by 2%.
“There are retirement challenges with CalPERS and investment performance,” Korach said. “The state has just under $500 billion in assets from all agencies. There is a direct impact on participating agencies and required contributions.
Korach said the board’s policy of an 80% funded status will be adhered to.
Laura Rocha, assistant director of city administrative services, said the city was in good financial shape, but time was not on the city’s side. Rocha said the city will review potential service cuts and the capital improvement program to find savings.
Hall said the board has also moved from a visionary board to more micromanagement, citing the 100-plus-minute motions passed by the board in recent years.
According to Hall, the multitude of motions wastes time and money and reduces the efficiency of staff, as they must react immediately to new directions. For example, Hall pointed to discussions of converting a tree stump into a bench, which was then not approved, as a waste of time and money.
Hall also noted that the city’s ability to pay for projects in cash has prevented unwanted debt and the draining of reserve accounts.
“Our lines cross, and we have to look at who we are and how we do business,” Hall said. “I don’t think we have any idea of the load we put on the staff. When you take this time more than 100 (moves), it becomes a number. It becomes a cost.