Union Tribune San Diego

Chula Vista faces growing deficits because of rising pension costs

  

by Gustavo Solis, UT Reporter

April 28, 2018


  

Chula Vista faced a $400,000 deficit this fiscal year, but a $1.6 million Federal Emergency Management Agency reimbursement from the January 2017 storm helped them balance the budget.

Some of that FEMA money can help balance next year’s $2.2 million deficit, but it won’t change the fact that Chula Vista’s deficits are expected to grow because of rising pension costs.


Chula Vista’s budget director, Edward Prendell, told the City Council this week that the city’s long-term outlook “continues to be bleak and despite both cost-saving measure and modest increases to revenues we anticipate a year-over-year growth in the deficit.”


The city’s estimates show that, at the current pace, the deficit will grow to $26.6 million by 2023 and $43.4 million by 2028


To balance future budgets, Chula Vista is looking for new revenue streams and cost-cutting measures, said the city’s finance director, David Bilby.


New revenue streams could come from marijuana sales taxes and, if approved, a sales tax increase that will go to the general fund but elected officials have promised will be spent on hiring new police officers and firefighters.


“The cannabis sales tax measure, we’re looking at that being a key revenue source going into 2020,” Bilby told the City Council.

Other revenue additions could come in the form of transient occupancy taxes from new hotels, and increased municipal fees.


The city has already invested in technology to make certain agencies more efficient. That includes a new dispatch and radio system for the police department, software for the accounting department, and paperless workflow options in City Hall.


Chula Vista also hopes to increase public-private partnerships and rely more on interns from local universities.


Bilby said if the city can get ahead of the growing deficit early, they will be in a good position moving forward.


“I’m not overly worried about what year eight looks like if we can structure and resolve years two and three; we’ll be in a much better spot,” he said.


Chula Vista isn’t alone in facing pension-related budget problems.

Municipalities across the state are financially strained because of pension costs.

 Cities like Chula Vista, those with large populations and relatively low sales tax and property tax production, face more challenges than affluent coastal towns, Bilby said.


Apart from finding new revenue sources and streamlining the bureaucratic process, Chula Vista is hopeful that changes to the state’s sales tax distribution system, possible pension reform, or lawsuits that could impact how pension benefits are awarded ease the city’s financial burden.


Chula Vista could gain as much as $2 million if California changes how it distributes sales taxes from online purchases, Bilby said.


In traditional transactions, the city where the sale happens gets 1 cent for every dollar of taxable sales. But in online purchases, state officials send the county a share of the revenue and the county doles out that money based on their most recent share of sales tax revenue.


Gov. Jerry Brown’s attempt at pension reform resulted in several legal challenges from the state’s unions. Several of those lawsuits are expected to make their way to the state Supreme Court this year.


Before any significant changes to the state’s pension, Chula Vista will continue to see rising pension costs.


Newer employees are in a new system called PEPRA, which will make a difference in the long term. 


But for now, Chula Vista has to find ways to keep up with rising pension costs.


“There’s this gap and it’s a big gap right now, but we’re hopeful that there will be a variety of solutions to bridge it,” Bilby said.


Chula Vista will host two public workshops on the budget in May. Anyone with questions about how their tax dollars are being spent are welcome to attend, Bilby added