City Council Item 11 March 5, 2018 Proposed Fiscal Strategy to Maintain Quality City Services & Address Aging Infrastructure needs City Council Item 11 March 5, 2018

Current fiscal position Expenses exceeding revenues Return to structural deficits Dipping into reserves to meet operating costs or reducing services to meet available resources Aging infrastructure Growing backlog of needs More expensive as time goes by

Current and projected fiscal trends

Actual or budget – the trend is the same

Actual or budget – the trend is the same

Aging Infrastructure – Growing needs Sidewalks - 822,000 square feet of damaged sidewalks – estimated cost $12+ million Police and Fire Departments emergency 911 radios – estimated replacement cost $8 million Most fire stations don’t meet current operational needs Public Works Building in need of seismic upgrade Future Unfunded CIP projects total $285 million

Aging and deteriorating Infrastructure

Damaged sidewalks and streets

Fiscal Responsibility The City has not been complacent $19 million ongoing reductions Elimination of 123 FTEs Pension reform: shift of $5 million pension costs to employees Fiscal Year 2019 Operating Budget Need to close $3.5 million gap General Fund Hiring freeze for non-critical positions Elimination of unfilled positions

Fiscal Responsibility Just getting by… Does nothing to address capital needs Puts the City in annual cut-mode Does not allow for additional services to meet new needs e.g., Homelessness Undermines our ability to pay competitive salaries to attract and retain talent

Consideration of asking voters Do they want to maintain quality City services Emergency 911 medical response Police Youth afterschool and recreation programs Do they want to address aging infrastructure Reinvest in public assets Maintain and enhance facilities Do they want to support local Public Schools Separate non-binding advisory vote

Options to enhance revenues For Capital projects only General Obligation Bond – 2/3rds majority required For either Operating or Capital General Tax – 50% +1; Special Tax – 2/3rds majority Parcel Tax – 2/3rds majority required Real Property Transfer Tax Parking Tax Transient Occupancy Tax Business License Gross Receipts Utility Users Tax Excise Tax Assessment District Payment in Lieu of Taxes (PILOT) Transaction (Sales) Tax

Transaction (Sales) Tax is best option Benefits Large tax base Paid by all shoppers not just Pasadena residents Generate significant additional revenues with small incremental increase in transaction costs - 75 cents for every $100

Year Approved by Voters LA County Tax Rates City Local Tax % Year Approved by Voters Commerce 0.5 2012 Compton 1.0 2016 Culver City Downey El Monte 2008, 2013, 2017 Inglewood 2006 La Mirada Long Beach Lynwood Pico Rivera 2008 San Fernando 2013 Santa Monica 2010, 2016 South El Monte 2010 Southgate

Why act now Planning for FY 19 operating and capital budgets How deep and how structural do next year’s reductions need to be What capital projects can we consider undertaking Opportunity to go to the voters may pass us by Should the County proceed with a sales tax measure Should Business Roundtable Initiative be approved Substantial work is needed To prepare educational materials and craft the ballot materials

PUSD Advisory Vote Separate non-binding vote Similar approach as to Santa Monica Maintains measure as a General Revenue 50%+1 Strong public schools are recognized part of Economic Development Strategic Plan Funds would stay local Based on need staff recommends proceeding with proposed ¾ cent measure regardless of whether PUSD is included of fails to garner 50%+1 support

Recommendation That Council endorse the proposed fiscal strategy to maintain quality City service levels and address aging infrastructure needs and direct staff to return to Council as appropriate to place a revenue measure and a separate advisory vote on the November 2018 ballot

Recent One-time revenues Fiscal Year(s) Description Amount 2016 Unwinding of sales tax triple flip $      2,000,000 Property tax administrative fee lawsuit proceeds $      1,100,000 2016, 2017, 2018 Successor Agency repayment of PCDC loans from General Fund (total amount) $    11,100,000 2015, 2016, 2017, 2018 Successor Agency repayment of Transportation Debt (annual amount) $      1,900,000 GF Reimbursement of embezzlement insurance settlement $          395,000 2017 Direct Use Tax payment for GT5 Turbine $          500,000 SB481 lawsuit proceeds $      9,000,000

Current and projected fiscal trends

Current fiscal position Fiscal Year 2018 General Fund Operating Budget – excludes debt service and transfer to PCOC

Current fiscal position Fund Balance

Current and projected fiscal trends Department of Finance

Current and projected fiscal trends

Reduction History – General Fund