If everyone is moving forward together, then success takes care of itself
— Henry Ford

OVERALL FINANCIAL HEALTH OF THE CITY

#3.    Taxes

Background: For roughly 40 years - except for one year (FY 18-19) when Measure D failed and Measure E had not yet been approved - PVE has relied on a Parcel Tax to fund a sizable portion of the City’s operations. The current Measure E Parcel Tax covers roughly 20% of the City’s expenses and approximately 70% of PVE PD costs (FY 22/23 budgeted cost of $7.1 million), not including $2.8 million in associated pension liability. It expires in FY 27-28. Together, the Parcel Tax and revenues from regular property taxes account for 60% of the city’s income. Using the average increase in regular property tax revenue over the past 20 years, it is doubtful that annual increases will exceed 5% going forward, and the increase may be lower if there is a decline in the housing market. Considering that taxes are generally the least palatable method of raising revenues in the eyes of residents, answer the following.

Question: What is your view of tax policy for the City and how tax revenues should be balanced among other sources of revenue such as those mentioned in question 1 above, most of which also engender some resident opposition? How should the City prepare for the future loss of revenue from Measure E? 

Responses:

 

Michael Kemps

MICHAEL KEMPS (incumbent)
”Public safety needs extend beyond the PVE Police Department – and a replacement measure must incorporate this. Residents express an overwhelming preference to retain a local police force. Efforts have been made to contract jail services, consider dispatch contract(s), discuss Joint Powers Agreements with other cities as an option to escape future pension exposure, and contracting with the Los Angeles County Sheriff’s Department. Those options have been reasonably understood and mostly exhausted. A sustainable parcel tax replacement for Measure E must fully fund all police department costs, inclusive of any estimated annual pension debt shortfalls and costs associated with CalPERS Classic and PEPRA Safety Plans, estimated using a Discount Rate and Rate of Return that is lower than CalPERS projections. It must contain an annual increase that keeps pace with inflation and salary competition, avoiding gradually shifting demand to the city’s general fund. In addition, unlike surrounding Peninsula cities, PVE is challenged with paying Los Angeles County Fire contract costs directly. Because the city contracted with Los Angeles County for fire services after the passage of Proposition 13, revenues from property tax payments have not kept pace with costs. A replacement Measure should extend to cover the difference between what other cities receive and pay for fire costs, and PVE’s actual County contract expense. We residents must acknowledge and pay for the services we consume, inclusive of all costs. Non-tax sources and general fund revenues should focus on meeting other resident needs: urban forest and landscape maintenance, fire clearance, and more.”
 

Victoria Lozzi

VICTORIA LOZZI (incumbent)
”Paying extra taxes and assessments on top of property taxes is a tough pill to swallow for most PVE residents. In addition to the parcel tax, most PVE residents also pay PVPUSD school bond assessments, as well as several L.A. County assessments. Nobody likes doing it, but most recognize that it is a necessity to fund and maintain control over critical things like high-quality education and local policing.

After serving for two years as your elected City Treasurer, I was elected to the City Council to develop a Long-Range Financial Plan, including strategies for funding our pension obligations and capital spending requirements. It became clear fairly quickly into my term that the deferred maintenance of our parklands, urban forest and other open spaces also needed to be a priority in the financial plan. This Council developed a model that looks out 10 years, making conservative assumptions about revenue and expense growth over time. I hope I am re-elected to continue that work, using the
Long- Range Financial Plan to determine the path forward as the sunset of Measure E approaches.
I believe your City Council needs to show the residents the full financial picture, offer trade-offs and compromises, listen to residents’ opinions, and then make the difficult decisions and bring a solution that works now and into the future.”
 

David McGowan

DAVID MCGOWAN (incumbent)
”The PVE character and “quality of life” is why most residents moved to this community. We are faced with paying for the cost of this luxury. As a fellow property owner, I am focused on how to meet this tax of residents in the most equitable way.

When and if, Measure E is replaced the form of replacement will need an annual escalator tied to inflation. Determination of the Measure E replacement should not only consider property taxes but also consider other types of taxation (such as utility taxes). Replacement tax needs and utilization might also be more clearly understood if directed specifically to support identifiable needs: PVE police, LA County Fire, parklands, infrastructure, etc.

On a parallel level we need to explore all non-taxable revenue opportunities first BUT we need to evaluate the revenue that PVE may receive with the cost of implementing and enforcing the revenue source. Some revenue sources may sound attractive on the surface but the net benefit to the city may not be worth the effort.

My personal PVE tax burden (likely similar to yours) during the past decade has changed very little, yet my other LA County taxes have increased 19%.

As a result of the one-year gap in PVE parcel tax revenue prior to the passage of Measure E, the City lost approximately $5 million of tax revenue that has not been regained.

With the current stringent PVE budget, the diminishing value of Measure E tax, and our residents desire to maintain our city’s character, it appears that a modified tax structure will be needed prior to Measure E’s sunset.”
 

Desiree “Dez” Myers

DESIREE “DEZ” MYERS
”RE: What is your view of tax policy for the City and how tax revenues should be balanced among other sources of revenue such as those mentioned in question 1 above:

City spending priorities should reflect the priorities of our residents.

A dedicated tax for our police allows residents to keep the police without being overridden by a Council. Grouping police costs with other taxes reduces the likelihood of passage of a dedicated tax for police. A police tax needs to fully fund our police since the current funding gap is being paid by neglecting infrastructure.

RE: How should the City prepare for the future loss of revenue from Measure E?

Promptly, transparently, inclusively and with effective communication and resident engagement

1. Build trust through engagement, disclosure and fact-based decisions
2. Transparently include all costs in the budget (change to accrual based)
3. Increase revenue with non-tax revenue
4. Conduct an operational review of efficiencies
5. Conduct a line-item budget review and eliminate low value spending
6. Implement a pension policy that prevents more debt and addresses existing debt so high interest costs are avoided then redirect the savings to infrastructure
7. Collaborate with residents to understand their priorities and what they are willing to pay for; Police, infrastructure, parkland, fire abatement, beautification, etc.
8. Provide financing options so retirees are not forced out from their homes
9. Let the people vote to choose what they value most, rather than forcing changes upon them.”

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