WHY DOES THE CITY NEED TO INCREASE REVENUE?
The City is facing increases in operating costs including contracted services, liability insurance, and personnel. Over the last two years, the City has implemented cost-saving measures, including reducing its workforce and cutting expenditures. Even with these steps and an improving economy, beginning in fiscal year 2019-20, Claremont’s General Fund will face a budget deficit that is further expected to expand to more than $2.8 million in 2023.
WHAT HAS THE CITY DONE TO CUT COSTS SO FAR?
Over the past two years, the City has taken a number of actions to reduce the cost of its operations without sacrificing the quality of service to the community. To balance the 2018-19 General Fund budget, the City cut $3.4 million. These reductions included the elimination of several staff positions and the deferral of maintenance projects. In preparing the 2019-20 General Fund budget, a further $1.3 million in reductions was necessary to balance the budget.
IF CLAREMONT DOES NOT PUT A SALES TAX MEASURE ON THE BALLOT, WILL THE CITY’S SALES TAX INCREASE IN THE FUTURE?
The State has a sales tax cap of 10.25%. If Claremont voters approve the proposed measure, local sales tax will reach that cap. However, if voters do not pass a measure and Claremont’s sales tax rate remains less than 10.25%, then any other sales tax adopted by County voters could be assessed on Claremont. Those funds would not be dedicated to Claremont services. The County and other agencies are considering sales tax measures.
WHAT OTHER REVENUE OPTIONS IS THE CITY CONSIDERING?
In July 2018, the City Council established the Future Financial Opportunities Committee to evaluate long-term and short-term revenue options and strategies. The Committee came up with many recommendations with an increase in the sales tax as first choice due to the urgency of fixing the deficit and the fact that the sales tax is paid by out of town visitors as well as residents. Other committee recommendations include economic development, a student fee, and purchasing corporations for construction projects. However these recommendations would not cover the entire deficit and may take years to develop.
WHAT IS THE CURRENT BREAKDOWN OF CLAREMONT’S SALES TAX?
The current sales tax in Claremont is 9.5%, of which Claremont gets 1%. The remainder goes to the State, County, and regional agencies. Of the millions locally generated in Claremont, only $4.5 million will return locally. Every cent of the 3/4 cent sales tax proposed by the local sales tax measure would stay in Claremont to provide essential services.
ARE OTHER LOCAL COMMUNITIES ADOPTING SIMILAR MEASURES?
Claremont would be the 21st city in Los Angeles County to attempt to raise its sales and use tax in recent years. Since 2016, nineteen cities in Los Angeles County have received voter approval for additional increases in sales and use taxes. Thirteen cities passed increases since November 2018, including the City of Burbank, City of Glendale, City of Pomona, City of Pasadena, City of Glendora, and City of Arcadia.
IF THE CITY HAS A DEFICIT, WHY ARE THEY DOING ROADWORK AND PARK PROJECTS?
The City receives revenue from property taxes, sales tax, permit and citation fees, state and federal funds, grants, and restricted funds. While property tax and sales tax can be used for any purpose, grants and restricted funds may only be used for specific purposes like road repairs, park improvements, or sanitation operations. The Foothill Boulevard improvement project is funded through restricted funds and grants received specifically for aspects of the project like bike lanes and bioswales. The upcoming improvements to Blaisdell playground are being funded by park dedication fees on new construction.
WHY CANT THE CITY USES RESERVES TO FILL THE DEFICIT?
The City's reserve balance is 19% or $5.4 million, down from a high of 30% in 2015. Using the reserve fund to would deplete the reserves over time and leave no money for emergencies.
WHAT HAS THE CITY DONE TO ADDRESS RISING PENSION COSTS?
The unfunded liabilities of the City’s CalPERS pension plans are $49,561,373. The unfunded liabilities have increased due to changes in CalPERS’ investment return assumption, from 7.5 percent down to 7 percent, as well as the fact that retirees are living longer. The City's retirement costs are projected to increase in 2019-20 by approximately $613,000 over the 2018-19 budget. The City Council has demonstrated a commitment to reducing its unfunded liability by including additional payments of $100,000 in 2019-20 to pay down the outstanding amount. Since 2010, the City Council has authorized over $2.8 million in additional payments to reduce its unfunded liability. These payments have been in addition to the City’s required annual pension contributions. Additionally, in 2012 the City created a tiered pension system for new employees and increased the percentage City employees pay into the system to the maximum amount.