How Can a City Reduce Services But Realize Increased revenues?

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December 30, 2014
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How can a city reduce public services and increase revenues? One of the most searing challenges for cities in distress is how to balance the need to cut services—but find ways to increase revenues. Indeed, in San Bernardino, city leaders have opted, over the last several years, to cut what they acknowledge are important services, because shrinking municipal revenues have left, seemingly, no other options. Whether in Detroit, Stockton, Central Falls—or any other fiscally distressed city or county—elected leaders, however, recognize that any long-term fiscal plan has to produce increased revenues. Cutting services, after all, is more than likely to reduce the attraction of new businesses or families to want to live there—and, similarly, to hasten the departure of both businesses and families to other municipalities. Such a plan could, of course, mean more efficient and effective collection of revenues (a key issue in Detroit); but in a larger sense it means devising a longer term plan that sets specific plans to increase revenues―but, of course, far easier said than done.

In the case of San Bernardino, the city last summer created a new position: a new deputy city manager, Bill Manis, who was tasked with developing such a plan. Mr. Manis, who began in September, this week reports: “I believe people can see changes already. With the dissolution of the former redevelopment agency, combined with the bankruptcy situation and staff reductions, the economic development function of the city was dormant for a period of time. That has officially changed thanks to the new leadership…We all have a ‘can do’ attitude and a united interest to bring prosperity and interest back to the City of San Bernardino.” But then Mr. Manis noted a few of the steps the city has taken, including: Updating the economic development presence on the city’s website; implementing an “Available Properties” data base for the city; completing the dissolution process for the Successor Agency (Please see inset below for the unique challenges created by the state impacting California’s municipalities.) and marketing projects that were part of the redevelopment agency. Mr. Manis’ plans also include:

On January 10, 2011, Governor Jerry Brown proposed the elimination of all redevelopment agencies (RDAs) throughout the State of California as a component of his budget proposal. Subsequently, on June 29, 2011, Governor Brown signed Assembly Bills 26 (AB1x 26) – a dissolution of all RDAs throughout the state, and Assembly Bill 27 (AB1x 27) – a bill that would create an alternative voluntary redevelopment program, which would allow agencies to continue redevelopment activity by voluntarily authorizing the contribution of tax increment to county auditor-controller offices to benefit education and public safety. On July 18, 2011, the California Redevelopment Association (CRA) and the League of California Cities (League) petitioned the California Supreme Court (Court) for a writ of mandate challenging AB1x 26 and AB1x 27, and a request for a temporary stay of both bills pending resolution of said petition (CRA v. Matosantos). The Court agreed to hear the Case and issued a partial stay; however, on December 29, 2011, the California Supreme Court ruled to uphold Assembly Bill 26 (AB1x 26), ordering the dissolution of all redevelopment agencies throughout the State of California effective February 1, 2012. Consequently, on January 9, 2012, the City of San Bernardino became the Successor Agency to the Redevelopment Agency (RDA) through Resolution 2012-12, whereas the Successor Agency would be responsible to carry out the enforceable obligations and administer the wind down of the former RDA. Furthermore, the City became the Successor of housing functions of the former RDA on January 25, 2012 through Resolution 2012-19. As a result, the City of San Bernardino began implementing its duties as Successor Agency on that date. The Successor Agency to the Redevelopment Agency for the City of San Bernardino will function, with limited authority, according to AB1x 26. The Successor Agency operates under the direction of an Oversight Board, the California State Controller’s Office, and the California Department of Finance.

• Working with the Successor Agency team on the Long-Range Property Management Plan;
• Discussing the need for an Economic Development Strategic Plan with the city manager, mayor and City Council;
• Working closely with the city Manager, Mayor and Common Council on the City’s Homelessness situation;
• Working with San Bernardino County and other partners to apply to be a Promise Zone (a federal designation that would open additional funding opportunities for the city). The application was submitted just before Thanksgiving, and results are expected in early 2015, according to Mr. Manis.
The San Bernardino Sun reports that some of the city’s elected officials believe that bringing in a team to help the city’s development was already paying off, with Councilwoman Virginia Marquez noting: “For a long time, (City Manager) Allen Parker was a one-man shop…Now we’re seeing a lot of things in the works, downtown and elsewhere. It’s really a positive thing.” Councilman Jim Mulvihill added: “It’s not getting all the attention, but we’re putting forward things that are going to make an important difference.” The Sun reports that Art Pearlman, CEO of the Arthur Pearlman Corporation, and who teaches at the Wharton School of Business and the University of Southern California—and who is familiar with San Bernardino’s development difficulties, noted that Mr. Manis is “very, very good at putting people and projects together. He’s a wonderful problem solver — and not everyone is.”

Motor City Deadline. Today is the deadline for Detroit’s low-income retirees to apply for financial assistance which would be vital to offsetting some of the loss in their monthly pension checks as a result of Detroit’s bankruptcy. The State of Michigan began accepting one-time applications this month for the initiative which arose out of the Grand Bargain intended to help supplement pension payments to qualified retirees affected by the city’s federally approved plan of debt adjustment. The Income Stabilization Fund Program was created as part of the bankruptcy resolution: it is intended to prevent eligible retirees from falling below the poverty line as a result of the impending pension cuts. The program allocates $20 million over 14 years for eligible retirees from either of the city’s two pension funds. In order to be eligible, a pensioner must be 60 or older and have an income that is at 140 percent of the 2013 federal poverty level, with the requirements adjusted for the number of dependents, but ranging from no more than an annual income of $16,338 for a single person to $22,022 for a household of two, and $33,390 for a household of four. The city estimates there are an estimated 20,000 retirees in the General Retirement and Detroit Police and Fire Retirement systems who will be affected by pension deductions resulting from the city’s bankruptcy. Under the city’s plan of adjustment, general city workers will take a 4.5 percent base cut in pensions and the elimination of their COLA or annual cost-of-living increase. In addition, the city will seek to recoup $239 million from the optional annuity savings fund accounts of some general city retirees who were credited with interest earnings that exceeded the retirement system’s actual investment returns. The stabilization plan does not cut pensions of police and firefighters, but it does reduce their COLAs from 2.25 percent to about 1 percent. The program is expected to commence on March 1st, when changes are implemented in benefit payments, according to pension officials: Michigan Treasury officials are overseeing the application process and report that, at this point, it is difficult to estimate how many retirees will qualify, since it will be determined on a case-by-case basis depending on adjusted gross income and dependents. But an initial expectation was that it could involve 6,000 to 8,000, according to Treasury spokesman Terry Stanton.

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