Measure H promises to maintain public safety funding with an increased utility tax. Is there a catch?

The City of Santa Cruz has been in reduction mode for 10 years. They employ 110 fewer full-time staff than they did in 2000, and most of the current employees have taken voluntary 10 percent pay cuts, not to mention furloughs. The city has cut spending across the board, and altogether axed funding for services like the Teen Center, Beach Flats Community Center and Harvey West Park.

And yet they continue to face a massive budget deficit.

Before retiring earlier this year, former City Manager Richard Wilson issued a budget memorandum to the city council predicting a $2 million deficit for the 2011 Fiscal Year. But that figure has continued to grow and is now closer to $5 million, says new City Manager Martin Bernal.

The $5 million is missing from the city’s general fund—its coffer of tax revenues—of which police and fire make up more than 60 percent of the spending. This presents an especially sticky situation for city officials: how to balance the budget without implicating public safety, which has become an urgent community concern over the last two years.

“Public safety has reached a priority level that we haven’t seen in Santa Cruz before,” says City Councilmember Cynthia Mathews, citing recent gang violence, the deaths of two teenagers, and the May 1 attacks on downtown businesses. “If we’re facing a $5 million deficit, we’re going to protect public safety to the extent we can.”

The city is looking at a variety of ways to address the financial gap, such as reforming pensions and approving new economic development projects. But their most specific plan—the one aimed at protecting funding for public safety specifically—rests in the hands of voters. The initiative, Measure H, will appear on the Nov. 2 ballot.

If passed, Measure H would increase the existing utility tax for city residents by 1.5 percent, raising it from the current 7 percent to 8.5 percent.

It would also redefine which utilities could be taxed—an update city officials say is overdue.

“We’re trying to just protect that revenue stream as technology changes—for technologies we don’t even know of yet,” says Finance Director Jack Dilles, adding that they don’t expect this redefinition to bring in significant profit. It will merely maintain the current level of revenue as more people move off of landlines, says Dilles.

But the 1.5 percent increase itself will indeed bring in a generous sum. According to Mathews, Measure H would generate in excess of $1.5 million for the city general fund annually—just enough to maintain funding levels for public safety services.

This would mean additional police officers, although the total number of sworn officers would still fall short of previous levels. “Staffing for us is 94,” says Deputy Chief of Police Rick Martinez. “In 2000 we were staffed at 104 officers, so that’s 10 officers short, and we’re handling about 16,000 more calls for service now than we were then.”

Earlier this year, the Santa Cruz Police Department had only 86 of the 94 positions filled; there was simply no funding to fill the remaining eight positions. But then “the community came unglued,” says Mathews, because of recent crime and violence. “We didn’t have the money but we said ‘OK, fill those positions,’” she says. The city received some federal stimulus money that helped pay for the four (out of eight) positions the SCPD filled; however, the grants last for only two years.

“We have short-term money that will cover those costs, but not money into the future,” says Mathews. “So that was the idea behind [Measure H]—to give us good solid funding for our public safety positions. It would allow us to sustain staffing amid cuts.”

Martinez says that the police department is in the process of interviewing applicants for the remaining positions, and that having eight additional officers will help bolster the force’s ability to both respond to calls for service (which have been increasing with each passing year) and problem solve in the community.

However, not everyone in the community is on board with Measure H. One of the main arguments against it is that it is not a designated tax: the revenue collected from the tax increase will land in the general fund where, legally, it can be used for anything—not necessarily public safety costs.

“The Measure provides no guarantees that the money will be spent on specific causes or for specific purposes,” says Sean Patrick Tario, a local entrepreneur and co-signer of the argument against Measure H on the public Voter’s Pamphlet. The opposition also points to the fact that there is no “sunset clause” in the measure, which means the tax raise is permanent rather than temporary.

“Our structural deficit is at least $5 million and it grows over time, so there’s no way we can do a temporary measure from a financial perspective,” says Bernal. As for the designation of funds, he admits that, technically, the city would not have to spend the money on public safety. And even if they do, a future council could legally direct those funds elsewhere.

However, Mathews says that the measure was designed as a general fund tax (rather than a designated tax) not because of any ulterior motive, but because a general fund tax is easier to pass. It requires 51 percent voter approval, whereas a designated tax would require a two-thirds majority.

In an attempt to soothe these concerns, the city council has passed a resolution of intent pledging to use the money for public safety as advertised. “It’s a promise to the people,” says Mathews. The council has come through on similar promises, she says, such as to use money brought in by the 2006 Measure H for streets and park security.

Another point of contention surrounding the measure is its treatment of low-income and senior residents. “Contrary to the ballot question, there are no exemptions in this ordinance for senior citizens … Low-income residents are not exempted either,” reads the rebuttal to the argument for Measure H. According to Bernal, this is misinformation: because of new and expanded utility tax rebates included in Measure H, such residents would actually end up paying less than they do now, despite higher initial rates.

Local businesses are another faction of the community that feels unfairly targeted by the Measure. Bill Tysseling, executive director of the Santa Cruz Chamber of Commerce, says that it was a tough decision for the Chamber whether or not to endorse the measure. On the one hand, he says, public safety is vital for a healthy business environment. On the other, businesses—especially those whose business relies on telephone traffic, requires many telephone lines, or uses a lot of electricity—will be faced with a hefty increase.

“The cost of this may be substantial for some businesses,” says Tysseling. “It’s a good deal more than the $6 per month per household [that the city has estimated]. Businesses have much higher utility bills than [residences] do.”

When polled, the Chamber’s membership was split on the issue. But ultimately, says Tysseling, most felt now is just not a good time to raise taxes. “Business people are doing layoffs, reducing employee wages and benefits, and making less money as owners,” he says.

Tario, from the No on Measure H campaign, says the same goes for private residences. “The last thing our citizens need right now is higher taxes,” he says.

Although Tario believes the city and its current leaders are more than capable, he says that, “over the past few decades our city has become addicted to following the easy path of acquiring more debt and raising taxes every time it needs to justify further spending.”

Councilmember Mathews attributes such opposition to a simple anti-tax, anti-government mentality—one that she feels isn’t deserved. “It’s mind-blowing what this little city does, and we’re very effective at bringing in grant money, and being creative,” she says. Time and options for balancing the budget are running out, Mathews adds.

“Here we have the whole community up in arms about public safety,” says Mathews. “We have a budget where expenses and income don’t fit, and here’s one way we can help solve it. Public, what is it? What do you decide? If it doesn’t pass there will be cuts that people are not going to like.”