In response to the COVID recession, the City of Morro Bay is seeking to pass a permanent tax increase to fund city services. However, this would deter consumption and harm household income during a pandemic. To spearhead a strong economic recovery, I will enact policies to stimulate the economy, reduce spending with zero-based budgeting, infrastructure development, and a possible freeze on tax and fee increases.
Morro Bay has been hit hard by the COVID-19 pandemic, with reduced TOT revenues (transient occupancy tax, or ‘hotel tax’) and subsequently almost doubling the general fund deficit to $1 million. While the economy has begun to recover, consumption is still down, and unemployment is still relatively high. Studies have repeatedly shown that sales taxes are the most regressive form of general taxation, and have the hardest impact on lower-income residents such as retirees (Hageman, 2020). Despite assurances from Council leadership that the majority of revenues will be paid for by tourists, many Morro Bay residents still shop locally, meaning they’d bear at least some of the impact. Working with local businesses is necessary to spearhead a strong economic recovery and attract new investment to Morro Bay.
In order to stimulate a strong economic recovery, I will do the following once elected Mayor:
- Treat businesses fairly and consistently. When obstacles arise from the Coastal Commission, City Hall should assist each business or resident to overcome them.
- Keep taxes down. I will address our budget crisis by cutting wasteful spending, as opposed to increasing taxes.
- Reestablish weekly business forums. I will reconvene weekly business forums to open a line of communication between City Hall and the business community. This would be a prime opportunity for discussion of innovative ideas, a gateway for business cooperation and a chance for businesses to seek help from the City government.
- Streamline city services. I pledge to reform city service delivery and introduce objective performance standards to make Morro Bay a more reliable guarantor of efficient service.
- Attract external investors. Work to balance the budget, repair city infrastructure and cut red tape to promote the City as resident-friendly and pro-investment.
- Freeze or cut fees where possible. I will work to freeze all planned fee increases, and order a study to determine where cutting service fees is revenue-neutral or revenue-positive by spurring economic development.
- Bring successful businesses together. I will hold a workshop with successful business owners to discuss their challenges and opportunities and bring an Action Plan for implementation by the City Council.
The City Budget
The City faces a $1 million budget deficit due to continued overspending by the City. The City Council seeks to make up for the shortfall by raising the sales tax, under the label “Local Recovery/Emergency Preparedness Measure”, without a sunset clause and without addressing the lack of spending restraint on the part of the Council. Instead of raising taxes, a balanced budget can be better achieved by streamlining and reforming city services, enacting zero-based budgeting across all departments and issuing a temporary City employee furlough for two days per month until the pandemic is over. Choosing a more fiscally responsible approach will put Morro Bay on the path to financial stability and economic recovery vand inspire greater business and consumer confidence. As a last resort, I would support a temporary sales tax to avoid a reduction in police and fire services with a “Measure Q2” at 0.5% only while the Pandemic continues.
Over the past ten years, Morro Bay’s fiscal outlook has declined, with revenues equalling expenditures in only one fiscal year in the past decade without using reserves. Rate and fee increases have been unable to fix the long-term budget shortfall. Before the onset of the COVID-19 pandemic, the city projected a deficit of $500,000 a year, and since the beginning of the COVID recession, that figure has doubled to $1 million as TOT revenues have dropped. To address this fiscal outlook, the City Council has proposed a 1% sales tax increase for voters to consider. The Council claims it will raise $2 million in revenue and primarily (70%) be paid for by tourists. However, it would slow the potential for economic recovery and increase the cost of living during both a pandemic and a recession. Salaries and benefits account for $11 million, almost 75% of Morro Bay’s budget. This is significantly higher than the 64% and 45% that SLO and Atascadero spend on payroll, respectively. For a $14 million general fund in a town of 10,000 people and a staff of 88, this is unsustainable.
Once elected Mayor, I plan to take action to get our financial trajectory under control:
- Enact a policy of zero-based budgeting. Beginning the budget baseline at zero each year will require City departments to justify every penny of taxpayer money they allocate. This will help ensure long-term fiscal stability and a leaner, more efficient government.
- Reform City service delivery. As Mayor, I will reform the City’s service delivery system to allow residents to utilize qualified third parties to conduct services such as inspections, planning, and other functions. I will also introduce objective performance standards for City departments in order to improve the quality and value of services such as Planning and Permitting.
- Increase Revenues. By working with local partners to make Morro Bay more business-friendly, we can increase economic growth and grow tax revenues. Many of my ideas are outlined in my Economic Recovery plan.
4. As a last resort, enact an employee furlough for two days a month. Following the State of California’s policy, I will have the City adopt a temporary, two-day per month employee furlough until the pandemic is over. Doing so would save up to $1.1 million over the following fiscal year, helping to close the budget shortfall and get the City’s books in the black.
Despite repeated water and sewer rate increases (218s), Morro Bay’s infrastructure is long past due for repair. The maintenance deficit for public infrastructure amounts to $41 million in 2020, a shortfall that will take years of concerted effort to close. I will work with the City Council, staff and stakeholders to make a number of structural changes that will stimulate infrastructure development, including speeding up the approval process.
Morro Bay’s infrastructure is in urgent need of repair. Despite water and sewer rates rising continually for more than a decade, the City of Morro Bay faces a $41 million infrastructure maintenance deficit. Numerous pipes are leaky, many roads have potholes, and some road markings are unclear. The City’s website continually lists long-delayed projects as “being planned” or “processing.”
Once elected Mayor, I will work to spur infrastructure development in the following ways:
- Cut red tape to expedite infrastructure approval process. I will eliminate unnecessary rules that slow down the approval process. Expediting infrastructure approval means repairs are made faster, which could save the City millions of dollars per year.
- 2. Cut waste and shift expenditures to infrastructure. In order to balance the budget and close the long-term structural deficit, I will enact a policy of zero-based budgeting and cut targeted waste. Some of the savings from these cuts will be redirected to rebuilding Morro Bay’s infrastructure.
- 3. Contract out where the City cannot complete projects on its own. If the City cannot complete an infrastructure project in a timely and efficient manner, we would work to find alternative means of doing so, and consider contracting out to outside construction firms that can accomplish the project efficiently and affordably.
- Reevaluate the Water Reclamation Facility project. I pledge to champion a full cost evaluation of the WRF project based on the results of the following Committee’s work. This would begin with re-establishing the WRF Citizens Advisory Committee and impartially looking at ways to deliver maximum value to the taxpayers.
Housing affordability is an issue of increasing importance in Morro Bay. Many are retired, many are renters, and many find it increasingly difficult to cope with the cost of living. High housing costs stymie economic development and drive workers elsewhere. To remedy this issue, it’s necessary to cautiously stimulate the production of residential housing. This will lower costs and increase affordability. This can be done by reducing permitting times, examining zoning laws, and introducing objective performance standards in local government.
Morro Bay, like much of California, is facing a housing affordability crisis. The median price of a new home in 2020 is $692,000, and 60% of the population are retirees, many of whom are renters. In a city of 10,500 people, over the past year just 20 new homes were approved for development. Yet, a recent statement at a Planning Commission meeting said that there are over 350 lots available for homes to be built on in Morro Bay. This is an issue that should be addressed proactively, and I am committed to a ‘pro-resident’ policy that balances the responsibilities of safeguarding the City’s historic character, spurring economic growth and growing the pool of affordable housing.
Based on the lack of affordable housing and need to spur workforce development, once elected Mayor I will do the following:
- Reduce permitting times and fees. Clearing the housing backlog requires speeding up approvals. To accomplish this, I will seek to cut permitting times and freeze or reduce fees.
- Examine rezoning areas of the City. In order to balance business and residential interests, rezoning some commercial areas for residential development is an option that should be examined.
- Move cautiously on large developments. Public input from the community should be taken when considering large developments.
- Convene a blue ribbon committee on housing. To accomplish the above goals, I will partner with 4-5 local home builders to provide their recommendations for improving the City’s housing stock. Lower development costs mean greater affordability for the buyer, more work for the builder, and increased property tax revenues for our schools.
- Objective performance standards in City departments. To ensure efficiency in government, I will implement objective performance standards in the Community Development Department and Planning Commission to track progress, incentivize improvement and approve permits in a timely fashion.
Water Reclamation Facility
The Water Reclamation Facility is over-budget, has been delayed repeatedly and has been subject to over 40 change orders. Projected completion is still far off, and it is likely to result in another rise in water and sewer rates for taxpayers unless a different approach is adopted by the City Council. My priority when elected Mayor will be cost control and a general project reevaluation. The first step will be to reconvene the Citizens Advisory Committee to take recommendations, and actively work with stakeholders to reduce the costs of the project.
In 2003, the City began exploring the establishment of an independent water reclamation facility. After 17 years of delays, change orders and millions in cost overruns, the project is still far off from completion. More concerning is the apparent unwillingness to consider more cost-effective solutions than the current framework. In 2018, the City Council hired an external consulting firm to evaluate potential locations for the project and which would be the most cost effective. Seventeen locations were surveyed in total, with the cheapest option being to locate the facility next to the existing Wastewater Treatment Plant. Doing so, the firm reported, could accrue savings of approximately $40 million, as the new plant would be able to make use of existing infrastructure on the ground. Nevertheless, the findings were ignored, and the project broke ground on the South Bay Boulevard location in 2020. As with any infrastructure project, the priority should be to achieve the greatest value and the highest quality service for the taxpayers. One of the concerns is the close proximity to the Estuary.
In order to proceed prudently while fulfilling the expectations of Morro Bay voters, I plan to do the following:
- Reconvene the Citizens Advisory Committee. The Citizens Advisory Committee will be reconvened with the intention of listening to and adopting their recommendations.
- Undertake a comprehensive cost evaluation. The cost of the WRF is currently projected to be over $140 million and counting. This is far beyond the mandate given by the voters, and a thorough cost evaluation will be undertaken to save taxpayer money.
- Work to reduce water and sewer rates. According to the study commissioned by the City Council, the WRF’s completion as projected would levy sewer rates of over $200 per month per household, which is too high for a median income of $50,000~ and more than double the EPA’s affordability index. Finding ways to reduce the cost of the project would mean reducing rates, amounting to an effective tax cut for the average household and increased viability for businesses, some of which are struggling to pay the increased rates.