Winning over the Council to Save Revenue
February 16, 2016
Eight years ago, the Great Recession turned municipal finances upside down, but local government revenue streams were often tenuous long before then. In California, Proposition 13 – passed by voters back in 1978 – transformed the basic social compact that cities and counties represent. It lowered property taxes by an average of 57% in a widely publicized effort to keep elderly homeowners from being forced from their homes. Prop 13 also contained other less well-known provisions, including requirements for most local governments to hold elections and secure two-thirds of the votes for special tax increases.
The need for tax reform before Prop 13 was clear, but these provisions had revenue consequences we are still wrestling with today.
In 2004, I served as the Finance Director in Ukiah, the largest city and county seat for Mendocino County, a surprisingly rural and remote area of northern California. The City had a limited tax base with little new industry and a large retired population. At the same time, the City faced increasing demands for the police and emergency services associated with a large daytime population and growing marijuana harvesting in the infamous “Emerald Triangle” of Mendocino, Humboldt, and Trinity Counties.
Sales taxes were the only locally-controllable option the City could pursue, but voters had twice-rejected special sales taxes dedicated to public safety. Surveys and anecdotal evidence supported our belief that no increase, other than public safety, could succeed with voters; and while both attempts garnered simple majorities, the 66.7% Prop 13 requirement seemed insurmountable.
Our executive team decided to try a different, but risky, path for the Fall of 2004. We prepared two ballot proposals for the election. A general sales tax increase, Measure S, included special audit requirements and a ten-year sunset. An advisory ballot measure recommended that the proceeds from Measure S would be used only for public safety purposes.
For this plan to work, the voters would have to trust the City to follow the advisory measure, since the tax would not be legally restricted. Despite the danger of losing the public’s confidence, asking them to approve the measure as a general tax meant that Prop 13’s supermajority requirements did not apply – a 50% vote would suffice.
To support the attempt, we had to win over the skeptical City Council. Measure S had no chance of passage unless we could convince each individual Council member to support it throughout the fall. They would need to speak out in meetings and walk the streets, knocking on doors, explaining the real numbers and needs to voters one by one.
As we made the final budget presentations for Council in May and June of 2004, we knew we had to tell the story factually and forcefully, making it clear and digestible to ensure our message sunk in. We prepared our usual line-item departmental budgets with the assumption that Measure S would pass. Departmental teams expanded and polished their narratives. We then added a special section, virtually a second budget, to highlight and explain the potential budget cuts if Measure S did not pass that November. We used the Budget to tell the story and present the hard numbers for the upcoming year, and beyond.
The cuts would be immediate and severe, reducing both the number of police officers on duty and our ability to respond to fire and emergency medical service calls. Other services in less critical areas would also face substantial reductions as the City attempted to manage priorities within very limited revenue streams. As usual, Recreation and Museum would be the first victims, but everything from street sweeping to the Main Street program would suffer.
Discussions in public Council sessions and individual meetings were long and difficult. We pored over detailed graphs and tables, flipped through budget binders, opened Excel files, and conferred with our teams over the details to answer Council’s questions. “Overhead” and administrative costs were challenged; retirement and payroll costs attacked. After turning over every rock and looking in every account, we finally secured the support and active advocacy of every Council member.
That November, we were too tired to pop the champagne corks by the time we went home late on election night; even though our tally board at City Hall had us over 68%. Besides, there were enough absentee ballots still being counted that it was not a certain win until the next morning.
The next morning, our victory was confirmed. We were grateful to see the vote succeed, and relieved to be spared from executing the draconian measures we had clearly detailed in the budget. We appreciated the Council’s support and the public’s trust and went to work delivering the quality services we could now provide.
In 2014, after ten years of clear and accountable results that the City communicated to the public, it was easier for the City to return to the ballot box and renew this critical tax measure. This time, they did not even need to include the sunset provision that had placed a cloud over the City’s long-term stability.
Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S. in Accounting from SJSU and M.S. in Instructional Technology from CSUMB.
Category: Government Finance