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PUBLIC HEARING FOR THE DISCUSSION OF THE PROPOSED MEASURE A SUNSET EXTENSION
recommended action
RECOMMENDATION
It is recommended that the City Council hold the first required public hearing to discuss an extension of the ¾ Cent General Transaction and Use Tax previously approved by voters at the November 5, 2013 election (Measure A).
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Summary
Measure A is a ¾ cent general transaction and use (sales) tax initiative that was approved by voters on November 5, 2013. Pursuant to the Measure A ordinance (2013-07-09-1601, Attachment B), the tax would sunset after ten years, on March 31, 2024, unless Council holds two publicly noticed meetings and adopts specific findings based on evidence. The findings and evidence must demonstrate that (i) the revenues provided by the tax continue to be necessary to accomplish the City’s general purposes, and (ii) that the total compensation paid to City employees is not excessive when compared to those of other similarly situated public-sector employers. This item represents the first of the two required public hearings to review these findings and evidence, which are included as Attachment A.
DISCUSSION
Background
In April 2012, the City initiated development of a Marshall Plan to reduce homicides and violence. Also in 2012, the City took the necessary action of filing for bankruptcy to maintain health and safety services for the Stockton community. An ultimate recovery plan was needed to emerge from the bankruptcy, become financially solvent again, restore City services, and invest in the Marshall Plan. In June of 2013, the City Council approved the Funding Proposal for Stockton’s Marshall Plan on Crime and Recovery from Bankruptcy (Attachment C). The Law Enforcement, Crime Prevention, and Other Essential Services Measure was approved by the City Council on July 9, 2013 for placement on the November 5, 2013 ballot. The measure was assigned the letter A on the ballot and was approved by voters with an effective date of April 1, 2014.
Measure A is a ¾ cent transaction and use (sales) tax that was approved as a general tax. Under California law, a general tax is any tax imposed for general governmental purposes, while a special tax is one imposed for specific purposes. However, Measure A was accompanied by advisory Measure B, which allowed voters to express an advisement that 65% of Measure A proceeds would be prioritized for law enforcement and crime prevention purposes such as those outlined in the Marshall Plan, while the remaining 35% would be prioritized for bankruptcy recovery and general service purposes. Measure A and B also instituted the Measure A Citizens’ Oversight Advisory committee, which would meet at least once annually to review the expenditures of revenues generated by the tax measure and make recommendations to Council.
Measure B’s primary programmatic document is the Marshall Plan, which called for doubling the staff of the Office of Violence Prevention (OVP), the institution of Neighborhood Betterment (previously Blitz) Teams, and the approval of 120 additional fully funded police officers. The Office of Violence Prevention targets the highest risk individuals in the community, offering resources and assistance to alleviate the factors that lead to continued violence and gang activity on an individual level. The Neighborhood Betterment Teams perform targeted abatement actions on neighborhoods to reduce blight. Another component of the Marshal Plan that has been implemented through Measure A is Operation Ceasefire, a partner-based violence reduction strategy uses respectful, direct communication with the highest-risk youth and young adults.
On February 25, 2014, the City Council approved the Marshall Plan implementation plan to add 120 sworn police officers and 43 civilian staff positions to rebuild the Police Department, establish the Neighborhood Betterment Team, expand the Office of Violence Prevention, and provide administrative support to these areas. The Police Officer positions were phased in over a three-year period adding 120 new positions to the 365 authorized sworn positions prior to the new tax measure. The chart below shows the City’s authorized sworn positions and the percent filled for each fiscal year through June 30, 2023. Over the years, Measure A also funded 114 cars, 412 radios, police recruitment expenses, police academy costs, OVP client services, fuel, radio system improvements, and numerous other services and supplies.
In addition to the 65% programmed for law enforcement and crime prevention efforts, 35% was advised, per Measure B, to be programmed towards funding the City’s bankruptcy exit plan, restoring reserves, replacing failing assets, and preparing for the next economic recession. In addition, any savings from the 65% also went to contribute to these efforts, including likely future programming for public safety. The FY 2023-24 Adopted Budget programmed 55%, or $158 million, of the General Fund’s $290 million in expenditures towards the Police Department alone.
Measure A funds have been subject to high levels of scrutiny since the ordinance’s inception, including a separate page for Measure B expenditures in both the City’s Annual Comprehensive Financial Report (ACFR) and Annual Budgets, additional external auditor attestation concerning the Measure’s agreed-upon procedures each year, and, most recently, a performance audit performed by the City’s internal auditors, which was presented to the Council Audit Committee in October 2023.
In addition to expending most of the unrestricted City funds each year on law enforcement, the following restorations to service from bankruptcy were funded using General Fund dollars. While the Measure A funds are legally classified as general-purpose revenues (i.e., General Fund), many of these service restorations would likely have been impossible without the additional General Fund revenues afforded by Measure A. Over the years that the transaction and use tax has been in effect, the City has leveraged the tax to effect considerable service recovery and delivery accomplishments.
Selected General Service / Bankruptcy Recovery Accomplishments Made Possible by Measure A
Over the decade that Measure A has been in service, the General Fund:
1. Provided for the fueling and operation of the City’s Police Helicopter and Unmanned Air Support program.
2. Resumed Cost of Living Adjustments for police officers. Cost-of-living and market adjustments increased Police salaries by an average of 6.1% annually over the last five years.
3. Added four Human Resources and Administrative Services Department positions.
4. Provided for a police wellness staff member and wellness program.
5. Performed clean-up efforts related to the City’s unhoused population consistent with Marshall Plan recommendation “Reclaim Neighborhoods: Disorder & Blight Reduction.”
6. Provided for community clean-ups/Clean City initiatives consistent with Marshall Plan recommendation “Reclaim Neighborhoods: Disorder & Blight Reduction.“
7. Maintained the Integrated Ballistics Identification (IBIS) System, software that allows for enhanced forensics in gun-related crimes.
8. Implemented Police Body Cameras.
9. Provided for the restoration and reopening of Fire Station No. 1, including facility improvements and the procurement of furniture, firefighting tools, and equipment.
10. Increased Fire sworn staffing levels 17 positions, with 9 positions for Station No. 1 which will be fully funded by the General Fund when the Staffing for Adequate Fire and Emergency Response (SAFER) grant ends.
11. Expanded the Fire Dispatch Center by 10 positions.
12. Implemented a fireworks program designed to decrease the possession and use of illegal fireworks through public awareness and enforcement.
13. Replaced outdated cardiac monitor/defibrillator equipment for emergency cardiac care.
14. Added a second fire academy per year to meet firefighter retention demands.
15. Added an Emergency Manager position that is responsible for emergency mitigation, preparedness, response, and recovery.
16. Allowed for Street Maintenance efforts, including: resurfacing streets, installing striped edge line lanes, improving sidewalk tripping hazards address, replacing sidewalks, sealing roadway cracks, street lighting improvement, and filling potholes.
17. Provided for tree services, including stump removal, trees trimmed at City Parks, and removed dead and hazardous trees citywide.
18. Helped fund parks maintenance and improvements, including replenishing playground surfacing; sports courts resurfacing; repairing and replacing playground structures; remodeling park restrooms; improvements to Pixie Woods’ boat, bridge, concession stands, irrigation system, and carousel; swimming pool repairs; Van Buskirk gym floor replacement; Victory Park tennis courts lighting improvements; Weber Point Events Center shade structure maintenance; and Oak Park ball field improvements.
19. Supported one-time costs associated with reopening the Fair Oaks Library in 2017, which was closed during the bankruptcy.
20. Performed field maintenance supporting youth and adult sports at City parks.
21. Allocated $2 million in grant funding for expanded Youth Service programming in FY 2023-24.
22. Resumed and expanded staff training efforts, such as the City Manager’s Leadership Academy.
23. Provided a complete replacement of all public safety radios; nearly every radio was beyond its useful life, and implemented and funded a replacement schedule for radio equipment. Completed installation of a new radio infrastructure core and new network infrastructure.
24. Internal self-insurance fund resources have been restored to positive balances from negative $48 million.
25. Implemented a modernized Human Resources and Financial System resulting in increased financial accountability and efficiency.
The above list represents “one-time” and ongoing initiatives that might not have been possible without Measure A proceeds. The ongoing costs associated would likely make maintaining some of these efforts infeasible. Reproducing the “one-time” efforts the next time they are needed, such as the next financial system implementation or the next refresh of radio equipment or law enforcement vehicles would become very difficult without the continuation of Measure A revenues, eventually returning many service areas back to bankruptcy levels.
Present Situation
The voter-approved Measure A ordinance allows the City Council to extend the 10-year sunset of the tax through Section 17 of the ordinance, which reads:
Sunset of Tax. (a) The taxes imposed by this Ordinance shall remain effective until the soonest to occur of the following: (i) the City Council repeals, or the voters repeal, this Ordinance; (ii) the City Council determines that the City has experienced economic recovery as defined in Section 18 of this ordinance, or (iii) ten (10) years from the date the taxes imposed by this Ordinance are first collected. However, the voters hereby authorize the Council to extend the sunset of the taxes pursuant to paragraph (b) of this Section 17.
(b) The City Council may extend the sunset of the taxes imposed by this ordinance as follows. The Council shall hold two publicly noticed meetings at least 14 days apart and shall adopt findings based on evidence before it that: (i) the revenues provided by the taxes imposed by this Ordinance continue to be necessary to accomplish the purposes stated in Section 21 of this Ordinance and (ii) the total compensation paid to City employees is not excessive when compared to those of other similarly situated public-sector employees.
The above-referenced Section 21 defines the purpose of Measure A revenues as:
Declaration. The proceeds of the taxes imposed by this Ordinance may be used for any lawful purpose of the City, as authorized by ordinance, resolution or action of the City Council. These Taxes are not special taxes within the meaning of section 1, subdivision (d) of Article XIII C of the California Constitution, but are general taxes imposed for general governmental purposes.
This item represents the first of the two publicly-noticed meetings required to extend Measure A. Measure A is a vital tool for economic recovery and for the City to remain fiscally solvent at its current level of services offered to the community. Approximately 17% of General Fund Revenues are provided for by Measure A funding. If Measure A were to sunset, the financial situation of the City would substantially deteriorate without significant budget cuts to General Fund supported programs, quickly eating through reserves and putting the City back at risk of insolvency.
The Long-Range Financial Plan (L-RFP) projects the City’s financial state over the next twenty years. Measure A tax revenues contributed an average of $36 million per year to the General Fund since 2014. These revenues and the use of the funds are part of the financial projections in the L-RFP. The chart below shows the projected ending General Fund balance with Measure A revenues continuing to the end of the model.
As can be seen in the graph below, without Measure A revenues the City would quickly start operating at a deficit, consuming General Fund reserves by FY 2027-28, and quickly returning the City to a state of insolvency. Extensive cuts to vital City Services would become necessary for the City to remain solvent.
To best understand the implications of this eventuality, City departments prepared a list of services they would be forced to scale back or eliminate in order to reduce their impact on the General Fund by 17%to maintain solvency. While these cuts are not an action plan, they demonstrate a plausible look at the choices City leadership would be forced to make in terms of service delivery without the revenue provided by Measure A. A select number of these service delivery impacts include:
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Department |
Citizen Impact from Potential Service Reductions |
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Police* |
Elimination of 155 sworn police positions. Authorized strength would be reduced to 330 from 485, permanently impacting our ability to restore services to the community and our gun violence reduction strategy. Additionally, there would be staffing cuts in Neighborhood Services, eliminating the Neighborhood Betterment Team funded by Measure A. Many support positions would be eliminated, further impacting department operations. Maintaining public safety positions is critical to our community's safety. |
|
Office of Violence Prevention* |
The Office of Violence Prevention (OVP) faces total closure. The department's staff, once 16 strong, would be slashed in half, reverting to pre-Marshall Plan era staffing levels. This extreme budget cut would incapacitate the Office of Violence Prevention, severely impairing their ability to combat gun and gang violence effectively in the community. The consequences would be dire: a breakdown in conflict mediation could fuel a surge in gang violence. The OVP's shooting emergency response program, a crucial peacekeeping initiative, would be eliminated, heightening the risk of retaliation without intervention. Emergency relocation services, essential for protecting victims and families, would be severely diminished, leaving them exposed to further harm. Additionally, the reduction in OVP's intensive case management would deprive high-risk clients of vital support, potentially forcing them back into a cycle of gang and gun violence in a desperate pursuit of necessities. This devastating scenario would significantly exacerbate gang and gun violence, posing an overwhelming threat to the citizens of Stockton. This significant budget cut threatens to plunge the City of Stockton back to the alarming homicide levels of 2012, reminiscent of the pre-Marshall Plan era when the city experienced its highest recorded number of homicides-72. |
|
Fire Department |
Total reduction in sworn fire personnel of approximately 30% to meet the 17% budget reduction target. Immediate response areas affected by the closures of three (3) engine companies and one (1) additional truck company will nearly double response times; and the effective response force on-scene time will almost triple the national standard identified in National Fire Protection Association (NFPA) 1710. Elimination of three engine companies will also result in the closure of three (3) fire stations as there will be insufficient number of personnel on duty each day to keep all fire stations open. Only 10 out of 13 fire stations will remain open. There will be limited resources for firefighting, medical, and all other services provided to citizens and businesses throughout the City; which will have a substantial impact on the Fire Department's ability to respond to emergencies. Reduction of relief crew will impact daily staffing levels as less staff will be available to fill in for absences due to illness, injuries, required training, or vacation. Loss of three engine companies and one truck company identified above will bring the total number of sworn personnel below the required SAFER grant minimum staffing maintenance requirement, resulting in to the potential loss of grant funds and the reduction of an additional 16 grant-funded firefighters. |
|
Public Works |
General Fund park sites (some City parks are funded through property owner assessments) will no longer be watered or maintained, with the exception being fire hazard mitigation (weed abatement) only. An example of this type of maintenance is the former Van Buskirk Golf Course site. Contracted services for illegal dumping and homeless encampment cleanups will be reduced to about 50% leaving a large amount of garbage and debris across the City. |
|
Community Services |
Reduction of security guard presence in Community Centers, fields, and aquatics, resulting in a loss of patron confidence in visiting centers, and participation in sports programs. Shootings have occurred at four facilities this year. Increased levels of vandalism and break-ins to facilities, and unruly behavior will be more difficult to stop and prevent. Additional funds were requested for FY 2023-24 for security services because of patron feedback; seniors and others report feeling unsafe without guards. Stockton Arts Commission annual grants would have to be scaled back, resulting in reduced support of local artists and mural beautification projects. Reduce field maintenance (Stockton Soccer Complex, Misty Holt-Singh, Louis Park), resulting in increased weeds and general health of playfields negatively impacting sports activities and creating safety hazards and poor aesthetic appearance. Loss of revenue from field rentals and tournaments. Eliminate library and community center staff, resulting in a reduction of open hours, including evening and weekend hours. This would further reduce programming available to patrons, access to resources, literacy programming, community-specific programs, and youth/adult activities. Reduce Library Materials, Resulting in City patrons waiting for digital books exasperating the already long wait times for materials as demand for digital items is increasing; fewer copies of newly released physical materials; patrons will need to wait longer. Eliminate support staff, resulting in an inability to support picnic rentals; slow response times to customer inquiries; delayed invoice processing and payment; extended timeline to fill vacant positions; reduced support of Stockton Arts and Parks and Recreation commissions; slower updates to websites. |
|
Economic Development |
Eliminate a position responsible for tracking and fostering business attraction leads, which has greatly improved Stockton’s ability to attract new businesses and assist current businesses with expansion efforts, as well as to recruit developers that best fit with the goals of the Economic Development Strategic Plan. Shut down the Oak Park Ice Rink. The Oak Park Ice Rink is the only Ice Rink in this region and used by several organizations in the area, including St. Mary's high school. Total to operate is approximately $1.1 million per year, and currently generates approximately $500,000 of operating revenues which helps to offset yearly operating costs. Downscale special events such as Fourth of July, Christmas Parade/Tree Lighting, and Concerts in the Park. Institute a seasonal closure of the Civic Auditorium, resulting in one full-time position reduction and decreased utilization by the public. Downscale landscaping and maintenance of Pixie Woods, resulting in a less well-kept and enjoyable park. |
*Due to Police and OVP utilizing 65% of Measure A funding under Measure B, these departments were asked to provide a scenario which depicted the elimination of all of the 65% Measure B expenditures and their percentage of the 35% remaining in the General Fund, rather than the flat 17% scenario that other departments were asked to prepare.
It is clear that the City would face vital challenges without the proceeds from Measure A; it is for that reason that the process outlined in the Ordinance to renew Measure A is being undertaken and the recommendation is to extend the tax an additional 10 years through March 31, 2034.
Updating the Measure B Spending Plan with the Extension
In alignment with the advisory Measure B, Measure A funds have been successfully utilized to implement the Marshall Plan components as outlined in the June 2013 funding plan including rebuilding the Police Department and expanding the Office of Violence Prevention. It is only in the last few years (since the COVID-19 pandemic) that filling police officer positions has become a significant challenge. While the 120 Measure A funded police positions stand open and ready for recruits, hiring to the full authorized strength of 485 sworn police officers has proved a challenge due to many factors, including a nationwide staffing shortage of police officers. The number of filled police positions has risen as high as 97% of the 485 approved positions in recent years, but historic challenges have resulted in a vacancy rate of 28% as of November 6, 2023.
In the October 2023 performance audit, the City’s internal auditors made several recommendations to improve transparency and utilization of Measure A funds, including a more strategic approach to officer retention, developing key performance indicators (KPIs) to better define and publish success of the measure, and implement expenditure guidelines to fully define what expenditures can be classified as Measure B.
If Measure A is continued, several actions will occur to accept these recommendations:
• Additional guidelines on the use of Measure A funds for Measure B purposes are in development and will be introduced during the FY 2024-25 Budget Development process. These guidelines will assist in prioritizing how any unplanned tax receipts might be spent on service needs such as adding back police officer positions, reopening Fire Truck Company No. 7, adding more OVP outreach workers, or park improvements.
• A new strategy will be proposed to reprogram the funding currently appropriated for 60 sworn positions that the City has been unable to fill toward recruitment and retention benefits for all non-management police officer positions. This proposed change in the spending plan is consistent with the recommendations in the October 2023 performance audit. Even with this reprogramming, per the required findings, officer compensation will not be excessive, being lower than several comparable agencies.
The New Strategy
With the consideration to extend Measure A, Staff is proposing a revision to the spending plan that will help in reducing the number of police officer vacancies. The City and the Stockton Police Officers Association (SPOA) have been collaborating to bring a plan to Council that represents a historic breakthrough in the City’s ongoing challenges to recruit and retain law enforcement officers. The City has attempted year after year to hire the 120 officers authorized by the Marshall Plan, and has come close, but new nationwide challenges have pushed this objective farther than ever in the last two years. By reducing the 120 positions to a more achievable target of 60 officers and reprogramming the funds allocated to those positions toward a retention program for all officers, the City will become a more attractive and enticing employer of sworn law enforcement professionals.
The total funding positions out of Measure A would be reduced from 120 to 60 police officers. The funding for these 60 positions would be reprogrammed to additional pay and benefits for all other police positions. These compensation items are subject to the extension of Measure A and will only continue as long as economically feasible. The agreement with the union includes the following language:
1. Funding for recruitment and retention incentives is contingent on the extension of the sunset date in Measure A, which will be considered for approval by Council in December 2023.
2. The City will be reallocating Measure A funding to pay for temporary programs to address critical recruitment and retention issues of police officers.
3. The reallocation of Measure A funds by decreasing the number of allocated police positions from 120 to 60 full-time employees is temporary to fund a temporary recruitment and retention plan for the Police Department.
4. The reallocation of Measure A funds towards these recruitment and retention incentives shall be reviewed annually by the City Manager and the City Council and are subject to available Measure A Funding. The City retains the sole discretion to make changes to the reallocation and such determination shall be final.
5. The City retains the right to increase or decrease the allocation of police positions based on the performance of Measure A Sales Tax.
This revolutionary new plan is expected to significantly decrease the City’s law enforcement officer vacancy rate through highly attractive benefits for law enforcement officers.
Findings Based on Evidence
The evidence presented in Attachment A clearly supports the findings required by the Measure A ordinance: that the Measure A tax has been and continues to be necessary to provide for the general purposes of the City. The evidence contains a list of services that were restored using the General Fund as well as a list of General Fund supported services that would be considered for elimination in order for the City to remain solvent should Measure A sunset.
The evidence also supports the finding that City employee compensation is not excessive when compared to other similarly situated public-sector employees. While the details of each labor negotiation are protected and confidential information, the broad process and methodology used to determine employee compensation is outlined in Attachment A and the results of these efforts are shown in the appendices (Attachment D). In summary, during negotiations, an external consultant compares each position to comparable positions in other similar agencies to determine the median or “middle” rate for each position. Market adjustments are made to keep employee pay at this median.
FINANCIAL SUMMARY
At this time no financial action is being requested. The City’s FY 2023-24 Annual Budget assumed the continuation of Measure A tax revenues and would need to be amended if the tax sunsets on March 31, 2024. The sunset extension findings may be approved after a public hearing at the next Council Meeting.
Allowing Measure A to sunset at this time would immediately result in disastrous consequences. Measure A revenues have averaged $36 million per year since enactment with $46 million budgeted in FY 2023-24. Sales tax revenue increases since the pandemic should be viewed as an anomaly and these levels are not likely to be sustained long-term. In FY 2023-24, 82% of the projected Measure A revenues are budgeted toward Measure B eligible public safety expenses. The sunset of Measure A would inevitably result in a broad reduction to vital City services to the public.
Attachment A - Recommended Findings Based on Evidence for the Extension of the City of Stockton Measure A Sunset
Attachment B - Ordinance No. 2013-07-09-1601 An Ordinance of the City of Stockton Enacting a General Transactions and Use Tax to be Administered by the State Board of Equalization, Upon Adoption by the Voters
Attachment C - Funding Proposal For Stockton’s Marshall Plan On Crime And Recovery From Bankruptcy June 25, 2013 Staff Report
Attachment D - Successor Memoranda of Understanding (MOU) Appendices Outlying Market Adjustments