This column originally appeared in the Orange County Register on July 7. The OC Taxpayers Association not taken a position on the proposed sales tax increase but merely educates on why Westminster is in the place that it is financially.
On June 22nd, the Westminster City Council voted to place a 1 percent sales tax increase on the November 8 ballot. For years, Orange County has been hearing and reading about dire budget warnings in Westminster. For years, members of the Westminster City Council themselves have stated that there was a fundamental problem that needed to be fixed. So how did we get to the point where government leaders are saying that the only solution is to raise taxes on the residents of Westminster?
In December 2011, the California Supreme Court upheld legislation that closed redevelopment agencies throughout California. Redevelopment allowed cities to collect a larger share of property taxes from property declared blighted and placed into a redevelopment area. Once a section of town was declared a redevelopment area, the property taxes that went to other local agencies, such as schools, were frozen. Any growth in property taxes within a redevelopment area then went directly to the redevelopment agency. As property tax revenue went up in those areas, so did the revenue to the redevelopment agency.
Redevelopment revenues were supposed to be used to fund projects that would help generate economic growth within a redevelopment area. Some of the revenues could also be used to pay for a portion of the salaries of the city employees who worked on redevelopment activities. For the city of Westminster, the problem occurred when the City Council decided in 2000 to enlarge their redevelopment area and, in an unusual move, declared the entire city blighted and a redevelopment area for the purpose of diverting property tax into the RDA.
According to a Los Angeles Times story from 2000, the city was looking to use the increased revenues to improve the city’s infrastructure needs. However, with the entire city now a redevelopment area, over time Westminster subsidized a larger share of their employee salaries. Westminster increasingly relied on redevelopment dollars to fund their day-to-day operations. It all came to a screeching halt in 2011 when the state dissolved redevelopment agencies, and their funding, statewide.
At the time, Councilman Tyler Diep told the Register, “It was not a good idea to use redevelopment dollars to subsidize a lot of our staff’s salaries.” In fact, according to the Orange County Register, there was talk at the time of Westminster not passing a state audit “because some of its positions were fully funded by money from the RDA.”
In response, the city went into lay-off mode in 2012 and was able to drop their projected budget deficit to just over $3 million. Over the next few years, however, while general fund revenues slowly increased, spending rose at a much faster pace. By June 2013, the Voice of OC was reporting that “city leaders had yet to articulate a detailed plan for closing the structural deficit, which is projected to deplete reserves within six years if expenditures remained at current levels.”
In 2014, the council approved a 6 percent salary increase to their police association to cover mandated contributions to their own retirements. In 2015, payouts for two federal lawsuits made the budget deficit even worse. Westminster’s contribution to CalPERS for staff pensions has grown $1.6 million since 2013. The projected budget deficit for 2017-2018 is now at $9 million.
Times of crisis offer us the opportunity to step up and lead. As cities all around them grappled with the loss of RDA funds, Westminster, more than others, needed to restructure how their city was now going to function and how and what services were going to be funded. That didn’t happen. While Westminster taxpayers now grapple with the decision of taxing themselves more, they also need to ask themselves whether or not this is a City Council they can trust with more of their hard-earned tax dollars.
Carolyn Cavecche is president and CEO Orange County Taxpayers Association.