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myBurbank Does a Complete Breakdown of Measure I

Editor’s Note – myBurbank will be publishing our voting recommendation of the School District’s Measure I ballot initiative to raise parcel taxes later this week. Hopefully this breakdown will give voters much needed information in this fact presented presentation by Greg Simay.

 

In the upcoming March 3 election, voters will decide whether to approve the BURBANK UNIFIED SCHOOL DISTRICT QUALITY TEACHER, STAFF AND SCHOOLS MEASURE, or as it will appear on the ballot, MEASURE I.  Voters can begin deciding Measure I as early as next week, when absentee ballots become available.

What Measure I Proposes

Voters are being asked to approve a new tax that, for the next 12 years, would bring about $9.0 million of additional revenues per year to the Burbank Unified School District.  Specifically, Measure I would:

  • Levy an annual, qualified special tax (the Education Parcel Tax) of 10 cents per square foot of improvements on each parcel of taxable real property in Burbank.
  • The EPT would appear as one of the items in the Property Tax bill. Check with your tax accountant or software, but the EPT is most likely not tax deductible.
  • This EPT would begin July 1, 2020 and sunset after 12 years, on June 30, 2032.
  • Parcels that are owned and occupied by at least one senior citizen are exempt from the EPT, but the District would require some paperwork.
  • Parcels that are owned and occupied by at least one disabled person receiving supplemental security income, or social security disability insurance benefits, are exempt from the EPT. However, yearly income can’t exceed 250% of the 2012 federal poverty guidelines from Health and Human Services.  Needless to say, the District would require some paperwork.

To pass, Measure I needs a two-thirds majority of the votes cast.  The two-thirds requirement comes from Proposition 13, which required strong majority approval for any local measure based on taxable real property.

Back in November 2018, an earlier version of Measure I (Measusre QS) had garnered about 58% of the vote, falling short of the required 2/3 (67%) majority.  Measure I contains a sunset provision, the lack of which had deterred some voters for supporting the earlier Measure QS.

Measure I pledges the District to use EPT revenues to maintain, and in some cases improve, the quality of education in its public schools.  Specifically, the authorized uses of EPT revenues would be to:

  • Attract and retain quality teachers and staff. Estimated annual cost:  $3.8 million to 4.2 million, representing about 42% to 47% of EPT revenues.
  • Maintain low class sizes. Estimated annual cost: $0.2 million to $0.6 million, representing about 2% to 7% of EPT revenues.
  • Maintain and expand career and college courses, art, music, science, and innovative programs. Estimated annual cost: $3.4 million to $0.6 million, representing about 38% to 43% of EPT revenues.
  • Maintain and increase safety and wellness support. Estimated annual cost: $0.8 million to $1.2 million, representing about 9% to 13% of EPT revenues.

To accomplish these aims, most of the $9.0 million in EPT revenues would go toward increasing teachers’ salaries and adding teaching staff. (About 80% of the District’s operating and maintenance expenses are labor related.)

Except for elementary school P.E., none of the funds would go for physical education and sports.  Parent booster groups would continue to shoulder the lion’s share of the funding for uniforms and transportation.

Measure I has requirements for transparency and accountability to the public.   Under Measure I the Board would have to:

  • Conduct annual, independent performance audits to assure that EPT proceeds are spent only for purposes that Measure I authorized.
  • Appoint an Independent Citizens’ Oversight Committee to further ensure that EPT proceeds are spent only as Measure I authorized.
  • Deposit EPT proceeds in a special account and conduct an annual independent financial audit.
  • Receive an annual written report that shows the amount of EPT funds collected and expended, as well as the status of projects funded by the parcel tax.

In November 2018, voters had approved an increase in the local sales tax rate to generate additional revenues for the City, in part because of similar oversight provisions.

Why a Parcel Tax?

Even if voters are willing to approve a public school tax measure designed to raise $9.0 million, they may object to the type of tax proposed to accomplish this.  Voters approved the City’s 2018 sales tax increase, in part, because one-third of the additional sales tax revenue comes from visitors to Burbank.  And Burbank residents are still free to buy a big-ticket item in an area where the sales tax rate is lower.  As taxes go, transient occupancy taxes (the “bed tax”) are even more popular since nearly all the revenues come from non-residents.  But except for seniors or some of the disabled, the EPT could not be mitigated or avoided, short of moving out of the District. 

So why a parcel tax?  Unfortunately, the District has fewer taxing options than municipalities and other local government agencies.  By law, the District can’t increase the sales tax rate, or impose a bed tax.  The alternatives are revenue bonds and parcel taxes.

Revenue bonds can be used to renovate existing school facilities or add new ones, but cannot be used to increase staffing or boost salaries.  But in the recent past the District has completed its (mostly renovation-oriented) facilities program.  And as reflected in Measure I’s spending purposes, the District maintains that staffing and salary levels are key to maintaining (and in some cases enhancing) the quality of education.  The EPT becomes the only practical alternative by default. 

Supporters of the parcel tax assert that it’s a local source of school funding that the State of California could not take away.  Opponents of the EPT disagree, citing Sate actions (albeit decades ago) that took away local funding in an attempt to equalize per-pupil funding across economically unequal school districts.   They urge instead that the State be politically pressured into increasing school funding, noting that California ranks in the bottom 10 states in school funding.  Supporters counter that, however desirable increased State funding might be, it’s unlikely to occur anytime  soon.

Some have pointed out that over 1,300 students do not have parents living in Burbank, and these non-resident parents would not be subject to the parcel tax.  These students are not displacing the nearly 14,000 students living in Burbank, which have first priority. Rather, the out-of-District students are occupying seats that would otherwise be empty and generate no revenue.  (Recall that school funding is on a per-pupil basis.)  Moreover, out-of-District parents could always choose to revert to their home school district if they were forced to pay some fee equivalent to what an EPT may have generated were they Burbank residents.  All things considered, it may be wise to regard the 1,300 out-of-District students as already providing a net-positive for the District’s financial health.

Some voters may flatly reject Measure I if they conclude that, in at least their case, a parcel tax is just too objectionable.  Other voters may be willing to support Measure I in spite of having disliking parcel-based taxes, but will on that account need a particularly strong assurance that the District will make effective use of the funds raised.

Does the District really need $9.0 million?

Based on its stated purposes, most Measure I revenues would go to maintaining the existing quality of education, with some programs enhanced.  In recent years, the District has raised all of its schools from a 5 or 6 rating (10 highest) to schools with no ratings lower than 8.  Maintaining these gains would understandably be important.  But why is an additional $9.0 million is required to do so, and how has the District managed in the past 16 months following the defeat of an earlier proposed parcel tax.

Sacramento is the culprit.  In order to reduce its own share of pension expenses, the State of California has unilaterally imposed increasing pension liability payments upon California’s local school districts, including Burbank’s. 

  • Up through FY 2013-14, District employees paid 7% of their paycheck toward their retirement, the District chipped in 7% and the State of California took care of the rest.
  • Beginning in FY 2014-15, the State has been increasing the District’s percentage each year until it tops out at 20% in FY 2020-21, less than four months away.
  • By then the District will be paying an extra $13.0 million per year compared to FY 2013-14 pension liability payments, before the yearly increases had begun.

Unlike the City of Burbank, the District has never had a legal option to forego its pension liability payments, even when the State’s pension funds were super funded.  Nor did the District have the option of diverting its pension payments to a “rainy day” fund during the retirement system’s flush years. Nonetheless, the District can’t forego these increased pension obligations even when the State raises them without the District’s input or consent. So pension payment increases have, of necessity, been factored into budgets ever since FY 2014-15. 

It should also be noted that the State, which accounts for about 95% of the District’s revenues, has only recently restored funding to the 2008 level, adjusted for inflation, but not adjusted for upping the District’s share of pension payments from 7% to 20%.  California used to be 5th in the nation in per-student funding; now it’s 41st

The District has become better at using funds efficiently. Voters naturally expect the District to be as cost-efficient as possible before asking for more revenues.  Recall that in November 2018, the District was only aiming for a revenue increase of $9.0 million, whereas the impact of the increased pension obligations would become $13.0 million by FY 2020-21.  That’s an indication that the District had been making judicious cuts from FY 2014-15 to FY 2018-19, when the increased costs of the pension payments were relatively small.  

The challenges have been greater since FY 2019-20, as the increase in pension costs relentlessly climb to 13 million annually.  Spending cuts continue, some of which are tolerable in the short term but detrimental over the long term, notably delayed cost-of-living increases.  Nevertheless, like the earlier Measure QS, Measure I has kept the proposed EPT at 10 cents per taxable square foot.  Evidently the District has found its way to absorb $4.0 million of the $13.0 million through various cost efficiencies.  Moreover, in recent years, the District has improved its management of capital projects, mainly by engaging professionals for whom project management is a core competence.

Several proven cost saving practices will continue. The District and the City will continue working together for their mutual benefit; City parks that use District school property is one notable example. The City provides some $1.9 million in annual support that would otherwise have to be covered by the District:  

  • School Resource Officers: $363,000
  • Joint-Use Agreement: $435,000
  • After-school Programs: $360,000
  • School-based counseling: $245,000
  • Crossing Guards: $466,000
  • Disabled student transportation to schools: $11,000
  • Public Works free recycle bins and pick-up service: $20,000

Additionally, the District takes advantage of a statewide contract and buys in bulk, with substantial annual savings over earlier purchasing practices.

It would appear then that the $9.0 million is needed to avoid a loss of muscle not the retention of fat.  Specific programs on the chopping block would include:

  • Teachers (by increasing class sizes)
  • Career Technical Education courses
  • Elementary Music
  • Middle and High School Arts
  • Gifted and Talented Education (GATE) program
  • Elementary PE program
  • Middle School Spanish courses
  • Technology supports

These cuts would make it difficult for the schools to retain their current high ratings.

Specific issues: teacher salaries and class sizes

Voters may accept that a parcel tax is the only means of raising revenues for day-to-day costs, of which 80% is labor-related.  They may also appreciate that the District has made a significant effort to reduce costs.  But they may question the nexus between education quality and teacher salary increases or class size.

Some voters may point out that Glendale teachers handle larger classes than in Burbank, while Los Angeles teachers handle tougher learning environments than in Burbank.  And that’s why they’re paid more.

But Burbank teachers are the big reason why school ratings have climbed from the 6’s to the 8’s, putting Burbank public schools in the top 20% of California public schools generally.  Every Burbank public school has received State recognition as a distinguished, Gold Ribbon school.  An estimated 6-to-11% of school aged Burbank children go to private schools; the low percentage is consistent with the excellent reputation, and performance, of Burbank’s public schools.  Achieving and maintaining high public regard not only requires a teacher with talent, but also a teacher with a willingness to devote many extra, uncompensated hours of going the extra mile in lesson preparation and professional development.  This level of dedication is needed from much of the support staff as well.

So why are the District’s teacher salaries 45th out of 47 unified school districts within Los Angeles County?  Indeed, the District receives the lowest amount of local funding per student among these districts; when state funding is taken into account, the District is second to last.  Arguably, COLAs at reasonable intervals make it easier for the District to retain the quality, dedicated employees it needs for continuing to have quality schools. 

Studies have shown that smaller class sizes are important up to about 3rd grade, and not so important to education quality after that.  The District has a particular education initiative of having only 24 students per class for kindergarten through 3rd grade. Beyond 3rd grade, class size is more a matter of balancing workload, taking into account the impact on teachers’ working conditions versus cost savings.

If Measure I passes, the Independent Citizens’ Oversight Committee may well ask the District to not only account for the appropriate use of Measure I funds, but for how well they produced measurable results.

 Immediate Cost Impacts of the EPT on Taxpayers

Some voters will reject Measure I based on cost impacts alone.  Their personal financial or business situations may be such that no public benefit claimed for the EPT, even if granted to be true, is worth the additional financial harm it would cause.  Measure I attempts to shrink this potential class of voters by exempting home-owning seniors and lower-income disabled. And because those having parcels otherwise exempt from ad valorem property taxes in a given tax year would also be exempt from the parcel tax in the same year, Measure I spares many non-profits, which have their own perennial budget challenges.

As for everyone else: residential parcels would provide about 35% of the $9.0 million raised by the EPT; commercial property, about 48%; and apartment building owners, about $17%.

  • For a cozy single-family residence of 1,000 square feet, the EPT would be $100 yearly. For a more typical Burbank residence of 2,000 square feet, it would be $200 yearly.  For a residence of 5,000 square feet, it would be $500 yearly.
  • If a single–family resident decides to add two additional adult dwelling units (ADU’s) of 500 square feet apiece, the EPT would be $50 per year for each one. The initial rental rate for these ADUs would likely be set taking this into account.
  • A commercial building owner with 50,000 taxable square feet would pay an additional $5,000 yearly. Depending on market conditions or provisions in a lease agreement, some or all of this amount could be passed on to the lessees.
  • A major landlord owning 1,000 rental units, with an average of 1,200 taxable square feet per unit, would have at least 1,200,000 square feet subject to the parcel tax. At 10 cents per square foot, the tax liability would be $120,000 per year.
  • A large corporate facility with 1,000,000 taxable square feet (think high rises) would pay $100,000 yearly. It is likely that a significant portion of this amount could not easily be mitigated, unless they were making large charitable contributions to the District; e.g., by contributing to the Burbank Educational Foundation.

The example concerning rental units merits further discussion. Under State law, landlords can only increase rents by 8% per year, raising the question of whether they could mitigate the EPT with higher rents.  However, it’s likely that tenants would see an 8% increase even without the EPT for several plausible reasons: real inflation is more than 3%; Proposition 13 may be repealed for commercial properties in the November election; the State may further restrict annual rent increases down the road.  So, relative to what they were planning to do anyway, landlords would experience the EPT as a pure hit to the bottom line and rate-of-return. So, while Measure I does not exempt senior citizen renters from rent increases due to the EPT, it’s probably a moot point.

Possible Long-Term Benefit Impacts on the Taxpayer

Everything else being equal, the relative quality of a community’s public schools significantly boosts property values, unless the absolute quality falls below a certain level.  For example, if a community manages to retain a decent level of public school education, while surrounding communities suffer a loss in quality, then property values are likely to go up.  But if a community is on a downward trajectory itself, even if surrounding communities are getting worse faster, property values are likely to stagnate or begin falling.

Conversely, if a community maintains its current, decent level of public education quality, but surrounding communities move on to excellence, then property values may fall.   

Back in 2018, 86 Los Angeles County communities surveyed, today’s residential real estate prices were compared to the previous, pre-Great Recession peak prices for 86 Los Angeles County communities. (The actual year of the previous peak varied slightly from community to community.)  Results: 30 communities were still below their previous peaks; nine had peaks up to 5% greater than their previous peaks; for 12, an increase of 5+% to 10%; and for 16, an increase of 10+% to 20%.

There were 19 communities whose current property values were more than 20% above their previous peaks.  With an increase of 26% over its pre-recession peak, Burbank was firmly within this last group—and in light of current property values, continues to be.  It shares the spotlight with wealthy enclaves like Beverly Hills, San Marino, and South Pasadena; and with beach communities like Santa Monica and Hermosa Beach. 

Burbank is prosperous, but with a median income of around $66,000, it’s no Beverly Hills nor is beach volleyball just a short walk away.  The drivers of Burbank’s property values are likely to be first, the housing/employment imbalance, then school quality, and then the range and quality of city services.  In any given year other factors—like those that led to the Great Recession—may push real estate values downward, in spite of continuing positive factors.  But the historic long term for Burbank has been upward.

While not necessarily relieving any cash flow challenges presented by property ownership, property appreciation does confer a long-term advantage that must be weighed against tax measures for purposes that tend to preserve that advantage.  

Revenue Impacts on the District.

The District is blessed with a number of corporate supporters, donating to the Burbank Educational Foundation and Burbank Arts-for-All among other initiatives.  Business owners with cross-generational ties to Burbank schools may decide to continue their level of charitable giving, even though the EPT hits both their business and their private residence.  Other businesses, focused more on California’s numerous tax burdens generally, may decide the local EPT is the final straw that makes them vote with their feet.

A large publicly held corporation, even if publicly spirited, is another matter. A certain level of charitable giving can be defended on purely investment grounds, such as burnishing the image of a valuable corporate brand, or honoring the values of an influential class of stockholders (e.g., “green” investing.)  However, past a certain point, an additional tax burden can mean a reduction in charitable giving, so as to mitigate the impact to the bottom line.

Would the EPT reduce charitable giving to the District?  The major donors have been discreet on this question.  However, it is significant that the Burbank Chamber of Commerce takes a neutral position on Measure I, electing to merely educate the community on its provisions.  While better for the District than choosing to oppose Measure I, it’s reasonable to conclude that the business community is divided about Measure I.  Business may also be holding their breath until the voters decide in November whether or not to repeal Proposition 13 for businesses.

So the District faces the prospect that EPT revenues may be accompanied by less charitable giving.  If donations were focused on supplies and materials, the goal of teacher retention is not affected in the immediate term, but may be affected in the longer term.

Concluding remarks

Parents have the greatest incentive to support Measure I.  If a parcel tax can maintain the high quality of Burbank public schools, then parents can in good conscience avoid the far higher costs of a private school—while still paying taxes in support of public schools they would no longer be using. 

Apartment dwellers would probably see 8% rent increases per year with or without the EPT. Seniors and many disabled would be exempt from the EPT.  These groups have an incentive to support Measure I if they are persuaded that it will allow the District to avoid going backwards to offering less quality education.

Businesses facing EPT’s in the tens of thousands of dollars have the least incentive to support the EPT, particularly if they are answerable to stockholders.  The District may have to commit to further increasing education quality across the board (perhaps all the way to the level of the high school choir programs) so that the District is in the top 1% nationwide.  Any company contributing to that level of success would arguably have a bragging point that increases the value of their brand.

In any case, the District’s challenge is to get two-thirds of the voters to approve Measure I, while retaining the good will of major corporate donors.

Voters Approve Measure P, Measure QS Fails by Less Than 5 Percent

Burbank voters took to the polls on Tuesday with just two local issues on the line: a sales tax increase to help Burbank City services and a school parcel tax that would allow schools to keep some programs.

Measure P, which was named Burbank Infrastructure And Community Services Protection on the ballot would approve an ordinance establishing a 3/4¢ sales tax providing approximately $20,000,000 annually until ended by voters.

It passed by slightly over 60% with 16,039 votes with only 10, 685 opposed.

Measure P will increase the General Fund’s sales tax percentage share from 1.00% to 1.75%, which would use up the remaining sales tax potential of 0.75% and boost the local sales tax rate from 9.50% to the maximum 10.25%.

The General Fund’s sales tax revenues is estimated to increase by an estimated $20 million, from an estimated $34 million to $54 million. The City will use this additional $20 million to meet increased pension liability payments and to fund needed capital improvements within Burbank, including more street repaving.

The extra 0.75% in sales tax will take effect beginning April 1, 2019, and it will continue until ended by the voters. There’s no automatic sunset provision.

Measure QS which would have levied 10 cents per square foot of improved property annually, providing approximately $9,000,000 in annual local funding, actually was supported by a higher percentage than Measure P, but fell just short of its 65 % passage. Yes votes were 16,354, no 10,161, which gave the measure only 61.68%.

A press release was issued on Wednesday by the Burbank Unified School District:

Despite earning the support of almost 62% of voters in Tuesday’s election, Measure QS does not appear to be on track for passage as the County works to finalize its vote count over the next few weeks. Measure QS would have raised over $9 million a year to address the District’s structural deficit, recruit and retain employees, and maintain and expand supports for our students. 

While Measure QS did not attain the 66.7% threshold as required by law, we greatly appreciate the support of the nearly 62% of voters who were willing to increase their financial commitment to Burbank’s schools. This was by far the greatest demonstration of public support for Burbank’s schools that the District has ever seen with 16,354 votes and counting.

Over the next few months the District will be scheduling a series of listening sessions to solicit public feedback as the Board and District administration consider the cuts necessary to address the structural deficit of the District. Some of the areas that will be considered for reduction include professional development programs, campus administration and support personnel, elementary music, secondary arts, college and career programs, the Gifted and Talented Education (GATE) program, and elementary physical education. 

While we know we face significant challenges ahead we remain committed to the fight for quality schools in Burbank. 

—The Burbank Board of Education and Superintendent Matt Hill 

myBurbank Recommends ‘YES’ Vote on Both Measures P & QS

myBurbank recommends a ‘YES’ vote for the City of Burbank’s Propositions P and the Burbank Unified School District’s Measure QS.Please take the time to read both of our Proposition fact pieces written by Greg Simay.

Measure QS 

Measure P

Here is our reasoning for supporting both:

MEASURE QS

We recommend a “YES” on Measure QS.

We thought a long time about this one.

The parcel tax will hit hardest large enterprises; many of them have been the strongest donors and supporters of Burbank schools.  For every 100,000 square feet of taxable real estate they own, they could be paying $10,000 a year more each year.  There will likely be some senior citizen apartment dwellers who could see a $10+ per month increase in their rents, if their landlords decide to pass along the costs of the parcel tax to renters.

And a lot of people in-between are hurting financially, even in an employment powerhouse like Burbank. 

But we’re asking you to vote yes anyway.  The Burbank Unified School District is in a pickle not of their making.  Since 2014, Sacramento has, without so much as a by-your-leave, been making local school districts pay more for teacher retirements so that it can pay less.  By 2020, our District will be paying $13 million more per year in pension payments compared to 2014.

If any state government deserves a pitchfork-and-torchlight parade, it’s Sacramento.  But don’t expect reform anytime soon.

Meanwhile, the schools face a $2.5 million deficit beginning in 2019 even if teachers receive no salary increase and even if no new education initiatives are launched.  Existing programs, including college and career courses, elementary school music programs and some physical education instruction, will be facing the ax.

The District has eliminated some top administrative positions, and the City of Burbank continues to pay for crossing guards and school resource officers, as well as helping out the District in other ways.  But at the end of the day, wages and salaries account for 88% of the District’s budget.  Making substantial cuts would immediately translate into larger classrooms and fewer programs.

We wished that the District had been beating the drums sooner about what Sacramento has done and will be doing through 2020.  Going forward, whether Measure QS passes or not, the District must do a better job of alerting the public to any funding challenges that lie ahead. 

If Measure QS passes, the District must pledge to go the extra mile in being accountable and making sure that we know that the Measure QS funds are really, truly making a difference in students’ lives.  To use an movie industry term, they need to show us that the “money made it to the screen.”

It’s been said that our children will not have it as good as we will.  And that may well be true if they don’t bring high skills to the marketplace, and especially true if they are saddled with college debt in the bargain.  But what if quality public schools could aim students in the right direction, being a strong candidate for an apprentice program for a high-demand trade or craft? Or shaving a year or so off college?  And not having to accomplish this by resorting to a private school?

Parents and relatives of Burbank students: we think you already know that Burbank schools are those quality schools.  That’s why so many of you paid a premium to buy homes here (and ok, maybe for a shorter commute as well.)

And that’s why we’re coming down on the side of voting “YES” for Measure QS.

MEASURE P

We recommend that you vote “yes” on Measure P.

The City is squarely facing its General Fund capital funding and operating budget shortfalls. A lot of its capital funding dried up when the State curtailed redevelopment in 2012.  Burbank’s redevelopment efforts had been very successful and as a consequence, had been able to support quite a few capital improvement projects that would otherwise have fallen to the General Fund.

The operating shortfall had been a self-inflicted wound; in prior decades, the City (along with most other California cities) took “pension holidays” rather than build a rainy day fund for tougher times, which came with a vengeance in 2008.  But during those times, the City did create a legacy of signature facilities, including upgraded fire stations and a signature Buena Vista Library 2.0.

The City has not waited until now to address the pension elephant.  It got its proprietary funds healthy enough to address their portions of the retirement burden, while still keeping rates and fees competitive.   For all new hires, including those in the General Fund, pension programs are significantly less generous than before, and the new hires are paying a higher percentage of the cost—50%.  A chunk of cashed-out redevelopment money was used to reduce future pension liability by $750,000 per year.

Over the last several years, the City has cut General Fund staffing by about 5%, not counting the further savings generated by the temporary hiring and salary freeze. As a result, emergency funds are fully stocked, and by the end of this fiscal year, the City will have generated over $14 million spendable surpluses.  More recently, the City is making progress in generating $9.0 million in savings per year, including having all employees—not just new hires—contributing to their retirements at the 50% level.

All of these efforts do not eliminate a need for the extra sales tax of ¾ penny per dollar.  Without it, there would have to be cuts in City services and capital improvements deferred.

But, the City has shrunk the elephant to the point that this tax would not only eliminate the operating shortfall, but could also inject over $10 million in annual capital funding.  And because of the spendable surplus, the City Council has the flexibility to decide how much to further accelerate the pension liability payments so as to reduce future payments.  In any case, the capital monies spent, by policy, would be in addition to a baseline funding level.  No shell games here.

And as taxes go, the sales tax is less onerous than most, and one-third will come from non-residents spending money here.  There will be watchdog committees in place as well, beyond the ongoing scrutiny from various Council watchers.

In other words, the City is firmly under adult supervision, to the envy of many of our neighbors.

There’s also the consideration that if we don’t raise the sales tax rate by ¾% to the maximum allowed rate of 10 ¼%, some other County or regional agency will.   At best, only a portion of the money wiould return to Burbank with—how to put this politely—distant accountability.   And hard-to-see results.  Even with a magnifying glass.

We’d rather the money stay in Burbank under the control of local officials that are accessible and accountable, rather than distant and unknown.

Vote “yes” on Measure P.

Measure QS – A Complete Breakdown of the Measure for the Burbank Voter

Editor’s Note: Greg Simay worked for the City of Burbank for over 40 years and retired in 2009. He has written for myBurbank for a number of years as our Entertainment Reporter. He has a vast knowledge of the City of Burbank and its workings. We asked him to break down both the Measure P and Measure QS ballot measures on the November 6 ballot. – cs

In the upcoming November 6 election, the Board of Education of the Burbank Unified School District hopes voters will approve Measure QS, which would levy a qualified special tax on each parcel of taxable real property.  For each parcel, this annual “parcel tax” would be 10 cents per square foot of improvements.  To pass, Measure QS needs a two-thirds majority of the votes cast.

The parcel tax is expected to generate $9.0 million in annual revenues.  The additional funding would enable the District to maintain and improve the quality of education, eliminate a $2.5 million deficit, and provide a 3% increase in pay to its employees.

The parcel tax would be levied annually beginning November 1, 2019, and it would continue until ended by the voters.  There’s no automatic sunset provision.

Why does the District need $9.0 million in additional revenues?

In order to reduce its own share of pension expenses, the State of California has been, and continues to, unilaterally impose increasing pension liability payments upon California’s local school districts, including Burbank’s. 

  • Up through FY 2013-14, District employees paid 7% of their paycheck toward their retirement, the District chipped in 7% and the State of California took care of the rest.
  • Beginning in FY 2014-15, the State has been increasing the District’s percentage each year until it tops out at 20% in FY 2020-21, less than three years from now.
  • By then the District will be paying an extra $13.0 million per year compared to FY 2013-14 pension liability payments, before the yearly increases had begun.

Unlike the City of Burbank, the District has never had a legal option to forego its pension liability payments, even when the State’s pension funds were super funded.  And more importantly when it comes to understanding the why’s of Measure QS, the District can’t forego its pension obligations even when they are being raised without its input or consent.

So, pension payment increases have, of necessity, been factored into the three-year budget for FY 2018-19, FY 2019-20 and FY 2010-21. And without the estimated $9.0 million in revenues from Measure QS, these pension payments will continue come at the expense of important goals for both the District and the community it serves:

  • Retention of quality teachers and other District employees. Over the last three years, the District’s teacher salaries have been 45th out of 47 of unified school districts within Los Angeles County. Without Measure QS, the District can’t afford to give teachers and other District staff a cost-of-living raise.
  • Eliminating a structural deficit. In spite of not raising salaries, the District is still having to grapple with a $2.5 million structural deficit.  Injections of one-time funds have kept the deficit at bay so far.  But without Measure QS, the School Board would have to cut programs when they adopt the District’s next three-year budget in June of 2019.  On the chopping block: elementary school music programs, college and career courses, as well as reducing physical education instruction and professional development.
  • To improve or maintain quality schools, the District has either expanded successful programs or launched new education initiatives. But without Measure QS, that all stops. The District would be debating which programs to drop.

With the $9.0 million from measure QS, the District would:

  • Enable a cost-of-living adjustment (COLA) of 3.0% for teachers and other District employees, starting in July of 2019. Cost: $3.6 million.
  • Permanently eliminate the structural deficit, thereby avoiding curtailments of existing programs. Cost: $2.5 million.
  • Implement several education initiatives that would preserve or expand the scope and quality of public school education. Cost: $2.9 million.

These education initiatives would include:

  • For kindergarten through third grade, maintain having only 24 students per class.
  • Expand a Gifted and Talented Education (GATE) program.
  • Provide additional supplies for Science, Technology, Engineering and mathematics (STEM) classes.
  • Increase mental health support programs
  • More funding to expand college and career programs, to increase arts education, and for more technology resources.

None of the funds would go for physical education and sports.  Parent booster groups would continue to shoulder the lion’s share of the funding.

Impacts of the parcel tax on the taxpayer, the District and the students.

The impacts of the parcel tax include those on the taxpayers, on the District and the students it serves.

Impacts on the taxpayer. 

There are zero impacts for those falling under either of two exemptions to the parcel tax:

  • Any parcel owned and occupied by a person 65 years or older would be exempt from the parcel tax. However, they would have to first submit some paperwork to the District. 
  • Any property otherwise exempt from ad valorem property taxes in a given tax year would also be exempt from the parcel tax in the same year. So, non-profits would be exempt.

Overall, residential parcels would provide about 35% of the $9.0 million; commercial property, about 48% and apartment building owners, about $17%.

  • For a single-family residence of 2,000 square feet, the parcel tax would add $200 yearly.
  • A commercial building owner with 50,000 taxable square feet would pay $5,000 yearly, which could be passed on to the commercial tenant as an increase in the monthly lease, depending on the terms of the lease agreement.
  • A major landlord owning 1,000 rental units, with an average of 1,200 taxable square feet per unit, would have 1,200,000 square feet subject to the parcel tax. At 10 cents per square foot, the tax liability would be $120,000 per year.

The example concerning rental units merits further discussion.  Each landlord would have to decide how much of the parcel tax to absorb, and how much to pass along to renters.  Note that Measure QS does not exempt senior citizen renters from increases due to the measure.

The values of rental properties depend importantly on the rates of return, which in turn depend on the extent to which rent revenues exceed expenses, both short-term and long-term.  If the landlord merely offsets the parcel tax with an increase in the monthly rents, it reduces the rate of return. To preserve a targeted rate of return, the rent increase must collect more than the parcel tax. 

For example, a 1,200 square foot apartment would represent a parcel tax liability of $120 per year, or $10 per month.  If the landlord chooses to protect a targeted rate of return of 10%, as well as to offset the parcel tax, then the renter of this apartment would pay $11 per month more, rather than $10 per month more.

As is often asserted, do the quality of Burbank schools and City services significantly boost property values?  For each of the 86 Los Angeles County communities surveyed, today’s residential real estate prices were compared to the previous, pre-Great Recession peak prices. (Note: the actual year of the previous peak varies slightly from community to community.)  Results: 30 communities are still below their previous peaks; nine have peaks up to 5% greater than their previous peaks; for 12, an increase of 5+% to 10%; and for 16, an increase of 10+% to 20%.

There were 19 communities whose current property values are more than 20% above their previous peaks.  With an increase of 26% over its pre-recession peak, Burbank is firmly within this last group.  It shares the spotlight with wealthy enclaves like Beverly Hills, San Marino, and South Pasadena; and with beach communities like Santa Monica and Hermosa Beach. 

Burbank is prosperous, but with a median income of around $66,000, it’s no Beverly Hills.  Nor would Pacific waves crash over Riverside Drive, even if all the ice were to melt.  That leaves the quality of schools and City services (with an assist from the housing/employment imbalance) as the likely driver of property values in Burbank.  While not necessarily relieving any cash flow challenges presented by property ownership, property appreciation does confer a long-term advantage that must be weighed against tax measures for purposes that tend to preserve that advantage.   

Impact on the District.  

As mentioned earlier, Measure QS would provide $9.0 million in additional revenue to the District, enabling it to provide a 3% cost-of-living pay increase, eliminate a structural deficit of $2.5 million (and that’s even if there were no pay increase), retain important educational programs, and launch others.

Along with the extra revenue would come requirements to ensure transparency and accountability to the public.   Under Measure QS the Board would have to:

  • Conduct annual, independent performance audits to assure that parcel tax proceeds are spent only for purposes authorized by the measure.
  • Appoint an independent Citizens’ Oversight Committee to further ensure that Measure QS proceeds are spent only as authorized in the measure.
  • Deposit parcel tax proceeds in a special account and conduct an annual independent financial audit.
  • Receive an annual written report that shows the amount of parcel tax funds collected and expended, as well as the status of projects funded by the parcel tax.

Arguably, Measure QS revenues could also be used to cover the impact of Measure QS spending on required reserve fund levels.  For example, if Measure QS leads to $8.0 million in additional expenditures, then at least 3% of this $8.0 million ($240,000) should be added to the reserve fund as a matter of prudence.  In this example, $760,000 of the revenues wouldn’t have been spent yet, and so would remain in a special District account.

Impact on the students.

Over 15,120 students are enrolled in the District, with priority given to Burbank residents, then backfilling as necessary with students of parents who work in Burbank, since State funding is based on seats filled. 

Preserving and expanding successful education programs (detailed earlier) would certainly benefit these students.  And to the degree it succeeds in retaining and attracting quality staff, the $3.6 million pay increase would arguably benefit students, if indirectly.

Evaluating Measure QS against alternative solutions

Measure QS is a response to less-than-adequate State funding especially in relation to the cost burdens it has been imposing on school districts statewide, especially when considering how it has greatly increased the pension funding burden at the school district level. The State, which accounts for about 95% of the District’s revenues, has only recently restored funding to the 2008 level, adjusted for inflation, but not adjusted for upping the District’s share of pension payments from 7% to 20%.  And note this: California used to be 5th in the nation in per-student funding; now it’s 41st.  

That being said, Measure QS is not the only possible alternative to addressing the District’s understandable budget concerns.  From most desirable to least desirable, there are three basic ways the BUSD can address this funding need:

  • Reduce costs in a manner that puts the District on a sound financial footing, but without taxes or reductions in the quality of education.
  • Increase revenues, such as by passing Measure QS.
  • Reduce costs by reducing the scope and quality of education programs, albeit by as little as possible and still remaining within state and federal standards.

These alternatives are discussed in reverse order, beginning with the least desirable alternative.

Cut costs by foregoing the pay increase or by cutting the scope and quality of education programs?

Recall that Measure QS funds are to be used to enable a cost-of-living a pay increase, to preserve and expand education programs, and to eliminate the $2.5 million deficit.

Should the District forego the pay increase?  If cost-of-living pay increases are delayed indefinitely, there’s the risk of losing quality teachers and other staff, to the detriment of the students.  This is especially true if the pay level is among the lowest in Los Angeles County, one of the highest cost-of-living areas in the country.  And the pay level for District’s employees is 45th out of 47 school districts within Los Angeles County.

But perhaps in times of budget crisis, there needs to be additional reasons for supporting a pay increase.  For example, teachers in neighboring Glendale have higher salaries, but they also have to handle larger classroom sizes as compared to Burbank.  Los Angeles teachers also have higher salaries, but many of them also have larger classroom sizes and face the challenge of teaching students from impoverished neighborhoods. 

So aside from market survey data, what might justify a COLA for Burbank teachers?

Two words:  quality schools. Every Burbank public school has received State recognition as a distinguished, Gold Ribbon school.  An estimated 6-to-11% of school aged Burbank children go to private schools; the low percentage is consistent with the excellent reputation, and performance, of Burbank’s public schools.  Achieving and maintaining high public regard not only requires a teacher with talent, but also a teacher with a willingness to devote many extra, uncompensated hours of going the extra mile in lesson preparation and professional development.  This level of dedication is needed from much of the support staff as well.

Arguably, then, COLAs at reasonable intervals make it easier for the District to retain the quality, dedicated employees it needs for continuing to have quality schools. 

Should the District forego expanding education programs?  At first blush, it appears that a significant percentage of Measure QS revenues would be used to increase the scope and quality of education programs. However, it’s been a truism in education that today’s enhancements often become tomorrow’s benchmarks for what constitutes a strong public school district.  The enviable reputation of the District today has come from embracing past education initiatives. 

A wider range of quality educational programs, besides benefitting students, is another factor besides pay that promotes retention of high-quality teachers who wish to grow professionally. 

Should the District cut education programs to eliminate the $2.5 million deficit?  Even if the District did not increase pay or expand programs, there would still loom the deficit, one that would require cutting programs in the absence of a revenue source. But a survey in March of this year confirmed what has been common knowledge:  Burbank citizens want its public schools to remain strong.  Education initiatives help the District to avoid a one-size-fits-all education experience, a failing that characterizes mediocre-and-worse school districts.

But for some, the issue is not putting the brakes on education initiatives. Rather it is whether the District has done a good enough job of fleshing out its education initiatives.  Do the initiatives require increased staffing? How much spending would be on supplies and equipment?   Some Measure QS proponents maintain that further fleshing out could take the initiative away from the citizens, which are intended by Measure QS to have an active role in program development.

Increase revenues by passing Measure QS and imposing a parcel tax?

Even in Burbank, there are a lot of people living paycheck-to-paycheck, with household budgets in worse shape than the District’s budget.   And a parcel tax is an arguably less desirable method of taxation than a bed tax or sales tax.  For example, one-third of the increased sales tax revenue from the City’s proposed Measure P would come from non-residents.  In contrast, over 1,300 students do not have parents living in Burbank, and these non-resident parents would not be subject to the parcel tax.

But by law, the District cannot raise the sales tax. A parcel tax is one of the few legal options available, though one requiring a higher level of voter approval (two-thirds) than a simple majority.  Proponents argue that the parcel tax, unlike revenue bonds, can be used to increase staffing or boost salaries, and that this is the best strategy for maintaining and improving the quality of education.

 A survey last March revealed that 58% of Burbank voters would “definitely” or “probably” vote for the parcel tax, as compared with the need for 67% of the voters to pass Measure QS. The survey also revealed that 29% would “definitely” not support the tax. That leaves 13% undecided, and most of those voters would need to be won over to provide the two-thirds majority for passage.

One argument in favor of the parcel tax is the assertion that it’s a local source of school funding that the State of California could not take away.  But others disagree, citing Sate actions (albeit decades ago) that took away local funding in an attempt to equalize per-pupil funding across economically unequal school districts.   They urge instead that the State be politically pressured into increasing school funding.  However, even after 10 years of investment, California is still ranked in the bottom 10 states in school funding.  It’s doubtful that the State would rescue California’s school districts any time soon.

There are also concerns whether or not the District budget as a whole is healthy enough for what may lie ahead: Even more State shifting of retirement funding responsibility to school districts? Boosting emergency reserves? Meeting future COLA increases? In this view, a measure that commits the District to implement additional educational programs may be premature, until the District’s budget is less vulnerable to various contingencies.  Proponents argue that Measure QS would address the most pressing budget problems, and there is no superior funding alternative on the horizon.

Can enough costs be cut in a manner that avoids imposing a parcel tax or cutting education programs?

Bear in mind that about 88% of the District’s budget is labor; only 12% is non-labor. Given that the District’s teachers are already among the least well-paid in Los Angeles County, and that the District wants to maintain smaller teacher-student ratios, cuts in compensation or staffing would be self-defeating, given that the public supports strong schools.

How about trimming administrative and other non-teaching staff positions?  Some administrative positions had recently been cut in a recent reorganization of senior management. Some fat may still be marbling the muscle, but $9.0 million worth?  Doubtful.

Several proven cost saving practices will continue. The District and the City will continue working together for their mutual benefit; City parks that use District school property is one notable example. The City provides some $1.9 million in annual support that would otherwise have to be covered by the District:  

  • School Resource Officers: $363,000
  • Joint-Use Agreement: $435,000
  • After-school Programs: $360,000
  • School-based counseling: $245,000
  • Crossing Guards: $466,000
  • Disabled student transportation to schools: $11,000
  • Public Works free recycle bins and pick-up service: $20,000

Additionally, the District takes advantage of a statewide contract and buys in bulk, with substantial annual savings over earlier purchasing practices.

Concluding remarks

The State of California has shifted the pension funding burden to local school districts, including Burbank’s. It would be nice if long-overdue fat trimming could solve the problem.  But the District has been putting its money into muscle; that’s one reason why Burbank schools are highly-regarded.  Moreover, there are good reasons to believe that Measure QS, aside from eliminating the deficit, would live up to its acronym and support Quality Schools.

So next Tuesday, Burbank voters will have to decide if the pain of a parcel tax is worth the real education benefits that it would confer on Burbank’s public schools.        

Measure P – A Complete Breakdown of the Measure for the Burbank Voter

Editor’s Note: Greg Simay worked for the City of Burbank for over 40 years and retired in 2009. He has written for myBurbank for a number of years as our Entertainment Reporter. He has a vast knowledge of the City of Burbank and its workings. We asked him to break down both the Measure P and Measure QS ballot measures on the November 6 ballot. – cs

In the November 6 election next Tuesday, the Burbank City Council hopes voters will approve Measure P (City Ordinance No. 18-3,904.)  It would add 0.75% (¾%) to the local sales tax rate.  Measure P can pass with a simple majority of the votes cast.

The current total local sales tax rate in Burbank is 9.50%, divvied up as follows: 5.00% goes to the State of California, 3.5% goes to various Los Angeles County agencies, and 1.00% currently goes to the City of Burbank’s General Fund.  For California, the maximum sales tax, with the local sales tax rate included, is 10.25%.

Measure P would increase the General Fund’s sales tax percentage share from 1.00% to 1.75%, which would use up the remaining sales tax potential of 0.75% and boost the local sales tax rate from 9.50% to the maximum 10.25%.

The General Fund’s sales tax revenues would increase by an estimated $20 million, from an estimated $34 million to $54 million.  The City would use this additional $20 million to meet increased pension liability payments and to fund needed capital improvements within Burbank, including more street repaving.

The extra 0.75% in sales tax would take effect beginning April 1, 2019, and it would continue until ended by the voters.  There’s no automatic sunset provision.

Impacts of Measure P on the taxpayer and the City’s General Fund.

The impacts of the sales tax include those on the taxpayers and the City’s General Fund.

Impacts on the taxpayer. 

For a hundred dollar purchase of household goods, the proposed ¾% would increase the sales tax by 75 cents, from $9.50 to $10.25.  In contrast, many of the food items on a $100 purchase at the local supermarket would be exempt from the sales tax. 

On the other hand, the impact on big-ticket items would be noticeable.  For a $40,000 car purchase, for example, the proposed ¾% would increase the sales tax amount by $300, from $2,850 to $3,150.

Neighboring Glendale and Pasadena are also asking their voters to up the local sales tax rate on November 6.  Sales tax shopping looks to be a bit harder.

Impacts on the City’s General Fund. 

The extra $20 million would start flowing into City coffers by June 2019, in time to be available for the City’s 2019-20 fiscal year.  Measure P revenues would be used to eliminate the General Fund’s operating deficit and substantially reduce the General Fund’s capital improvement funding shortfalls.

Eliminating the operating deficit.  Absent cost cutting or additional revenues, the City’s General Fund will face a long-term operating deficit of $9.5 million, driven by increased pension liability payments, within four years.

  • The General Fund’s required annual payment for the City’s unfunded pension liability will be increasing by $14.6 million, from the current $12.9 million to a forecasted $27.5 million by FY 2022-23, less than four years from now. These higher-level payments are forecasted to continue for over 20 years before dropping back to the $12.9 million.  
  • Earlier this year, the potential operating deficit in FY 2022-23 was expected to be $30.5 million per year, but Burbank voters passed Measure T and preserved the In-Lieu Transfer, which provides $12.5 million annually. So now the potential operating deficit is down to $18.0 million.   
  • However, the City is actively working to reduce General Fund labor-based operating expenses so that by FY 2022-23, the deficit will have shrunk to $9.5 million. A major reform will be to require all existing employees, including Police and Fire, to pay one-half of their pension costs going forward; this requirement already applies to new hires.

Addressing capital improvement shortfalls.  To meet 75% of currently unfunded capital improvement needs over the next 25 years, the General Fund would need to provide $17.9 million per year in additional capital funding from a new revenue source.  

  • The City has identified $683.0 million worth of the infrastructure needs that would rely on the General Fund: $151.5 million for streets,  $99.5 million for facilities, $94.0 million for parks, $126.2 million for storm drains and $213.1 million for new assets. 
  • An extensive laundry list of unfunded infrastructure needs will have projects competing to be high priority, and not every proposed project will merit the green light. However, significant annual outlays would have to occur to make any significant progress on projects that do make the cut. Funding at the 75% level would allow the City to tackle its priority infrastructure needs.
  • To have a steady program of street pavement improvements, the City would need $8.0 million annually. Currently the City can devote $3.0 million from existing annual funding and $2.5 million from SB1 annual revenue, for a total of $5.5 million. 

If Measure P passes, the City could make significant progress toward the $17.9 million funding at the 75% level.  If a persistent $9.5 million per year is needed to meet what would otherwise be an operating deficit, then up to $10.5 million in annual Measure P revenues could be devoted toward the $17.9 million target on a pay-as you-go basis.  For example, the City could provide an additional $2.5 million for street paving, bringing the total funding to the $8.0 million needed for a continuous paving program

Measure P revenues could also be leveraged to support a higher level of capital funding, if it were used in bond financing.  The General Fund is nearly debt-free; the one outstanding bond will be paid off in June 2023.  So it seems feasible for the City to keep debt servicing well within the Measure P revenues available for capital funding, and avoid overleveraging.

How the General Fund got into trouble.

Deferred pension payments caused the operating shortfall; the end of redevelopment hurt capital funding.

Deferred pension funding has long been the proverbial elephant in the room, one that, in the past several years, the City has started to seriously face.

  • Typically, the California Public Employees Retirement System (CalPERS) needs annual contributions from Burbank and other member cities in order to meet its pension obligations to them. But during the go-go 90s, CalPERS had achieved very healthy rates of return, healthy enough to stand in for the California cities’ annual contributions.  By 2002, the City’s retirement plans were between 130% and 140% funded.  Burbank, along with most other California cities, decided to defer the pension payments.
  • In fairness, the City had suffered budget blows as Lockheed, from 1989 through 1994, withdrew from Burbank as the classic Cold War ended and the political center of gravity shifted eastward. Not having to fund pensions for was a welcome break.  The 90s also saw the successful retention of the major studios as well as major progress in attracting new developments, progress that continued into the 00s.    Sales tax revenues were rising and property values were roaring back.
  • But California cities generally—not just Burbank—should’ve realized that the fat times were getting leaner. CalPERS funding sank below 100%.  Rates of return became volatile, especially during the “Great Recession.”  In those turbulent times, CalPERS suffered nearly a 25% loss in a single year.

In hindsight, the city councils of yesteryear should’ve taken advantage of the good times and established rainy day funds, or at least resumed pension payments to keep retirements from becoming less than 100% funded.  As well, CalPERS should’ve begun earlier to base their earnings projections on lower, more stable rates of return.

Instead, the City embraced an ambitious building program: rebuilding fire stations, adding a signature library, and building modern headquarters for police, fire and other customer services.  All worthy projects benefitting the community, and leaving a legacy of quality facilities for years to come.  Unfortunately, there’s now also a legacy of revenue shortfalls.

Beginning earlier this decade, the City has been shrinking the pension elephant.   For new hires in all categories, including Police and Fire, the City offers significantly reduced retirement plans. New hires must also pay 50% of their retirement.  As the years pass, these reforms will increasingly reduce the City’s pension liability exposure. And as will be described in greater detail later, the City has been making progress on other reforms independently of Measure P. 

But meanwhile, the pension elephant is still formidable.  Today, the City’s pension plans are funded between 70.2% and 76.5%.  A wiser CalPERS now aims for lower-but-more-stable returns on investment, recently lowering their long term investment rate-of-return target from 7.5% to 7%, phased in over the next three years.   And this, along with the need to re-achieve 100% retirement funding, means the City will be contributing more, much more, to CalPERS.

The discontinuance of redevelopment has been a blow to capital funding. 

  • Under redevelopment the City had been able to keep the difference between the property tax revenues from new projects, and the taxes from the old facilities they replaced. The additional revenue was used to support bond funding, which in turn often supported various capital improvement projects. 
  • Although these projects had to have a nexus to the City’s redevelopment efforts, they often overlapped with projects that the City would have had to undertake anyway. So in practice redevelopment became an important source of capital funding, worth tens of millions annually in the 00’s.
  • For a variety of reasons, including the State’s desire to reclaim tax increment revenues for itself and its counties, redevelopment ended in February 2012, setting the stage for the underfunding of he City’s infrastructure projects.

Meanwhile, the City’s infrastructure needs to be replaced, retrofitted or otherwise overhauled.

There is some good news: Several important funds are not facing operating and capital budget shortfalls.  Water, power, refuse and sewer services are not in trouble. These services are supported by separate water, power, refuse and sewer rates, and rate revenues flow into various proprietary funds, which are distinct from the General Fund.  Proprietary funds will continue to cover their share of employee retirement obligations, to meet their various capital needs and to keep their reserve funds strong.  Moreover, the City’s rates are very competitive with those of neighboring agencies, while supporting high levels of customer service.

Evaluating Measure P against alternative solutions

From most desirable to least desirable, there are three basic ways the City can address the General Fund’s operating deficit and underfunded capital improvements:

  • Reduce costs in a manner that allows high levels of customer service to continue and infrastructure investment to occur.
  • Increase revenues, such as by passing Measure P.
  • Reduce costs by reducing the scope and quality of customer service and infrastructure maintenance, but without endangering public health and safety.

Whichever alternative is adopted, the General Fund’s emergency reserves of about $33 million would remain untouched by policy. 

These alternatives are discussed in reverse order, beginning with the least desirable alternative.

Cut costs by cutting the scope and quality of services?

Even with a very cautious approach to preserving public health and safety, there could still be a number of across-the-board service cuts that would immediately reduce the quality of services and further reduce them over the long term, as streets and other public infrastructure deteriorate.  And to the extent one City service is spared the ax, all the other services would suffer deeper cuts.

It appears that a strong majority of Burbank citizens do not want service cuts.  Some cities, with smaller revenue bases than Burbank’s, no longer have their own municipal police and fire departments (or never had them in the first place,) electing to rely on the County Sherriff or County Fire.  These cities made the decision to accept an adequate, but less tailored, level of service for a lower cost.  Other cities have scaled back recreational activities, or limited hours of operation.   Their citizens hopefully have at least a lower tax burden to offset a reduced quality of municipal services.

But in Burbank’s case, strong public sentiment to preserve the City’s high standard of public services continues to be very strong.  In November/December 2017, over 2,600 Burbank registered voters were surveyed on City services. (This is a large enough sampling to allow the Council to reliably take the pulse of the voting public.)  Last January the City Council learned that 90% of the respondents thought it extremely important or very important to maintain high levels of police, fire and 911 response.  For keeping neighborhoods safe and clean, it was 86%; for maintaining park and recreation facilities and programs, it was 73%.  Overall, 82% of those polled agreed that maintaining the City’s essential services was extremely or very important.

As is often asserted, do the quality of Burbank schools and City services significantly boost property values?  For each of the 86 Los Angeles County communities surveyed, today’s residential real estate prices were compared to the previous, pre-Great Recession peak prices.  Results: 30 communities are still below their previous peaks; nine have peaks up to 5% greater than their previous peaks; for 12, an increase of 5+% to 10%; and for 16, an increase of 10+% to 20%.

There were 19 communities whose current property values are more than 20% above their previous peaks.  With an increase of 26% over its pre-recession peak, Burbank is firmly within this last group.  It shares the spotlight with wealthy enclaves like Beverly Hills, San Marino, and South Pasadena; and with beach communities like Santa Monica and Hermosa Beach. 

Burbank is prosperous, but with a median income of around $66,000, it’s no Beverly Hills.  Nor would Pacific waves crash over Riverside Drive, even if all the ice were to melt.  That leaves the quality of schools and City services (with an assist from the housing/employment imbalance) as the likely driver of property values in Burbank.  While not necessarily relieving any cash flow challenges presented by property ownership, property appreciation does confer a long-term advantage that must be weighed against tax measures seeking to preserve that advantage.   

Increase revenues by passing Measure P and increasing sales tax revenues?

Even in Burbank, there are a lot of people living paycheck-to-paycheck, with household budgets in worse shape than the City’s General Fund.  Nevertheless, Burbank voters by a 4-to-1 margin voted last June to retain the In-Lieu Transfer, an important source of revenue for the General Fund.

But it’s one thing to agree to retain a tax of long standing (since 1958) with no increase in the rates, only an updating of the enabling language.  It’s another thing to propose a tax increase.  Even so, 69% of those polled in the November/December 2017 survey stated they would vote to support a local sales tax increase of ¾%.

Perhaps that’s because if a tax hike is the only alternative to deep cuts in services, upping the sales tax is one of the less-painful methods.  Because of its wide applicability, a modest increase in the sales tax rate can generate millions in revenue. As mentioned earlier, passing Measure P and changing the sales tax rate from 9.5% to 10.25% would generate an extra $20 million annually for the General Fund, beginning in FY 2019-20. 

Past trends suggest that about one-third of the Burbank’s sales tax revenue comes from residents, one-third from local businesses and one-third from non-residents shopping in local Burbank businesses.  It’s true that Transient Occupancy Taxes (the “bed taxes”) get almost all their revenue from non-residents, but increases in the TOT within the bounds of reason wouldn’t raise as much revenue.  It’s also worth noting that individuals and businesses have direct control over their purchasing and, to that extent, some control over how much sales tax they’re prepared to pay.  As mentioned earlier, many food items are exempt from sales taxes, making them less regressive for low-and-moderate-income purchasers.

If Burbank citizens might be taxed anyway, shouldn’t they at least keep the money within Burbank? If Burbank doesn’t capture the remaining 0.75% of sales tax potential, some other agency probably will, and sooner rather than later.  Recent history fuels this concern.  In March 2017, Los Angeles County persuaded voters to pass Measure H, which added 0.25% to the sales tax rate for countywide funding for services to the homeless.  But here’s the kicker: Although Burbank is contributing about $8.0 million for this purpose, the County is under no obligation to dedicate any local return to Burbank or, for that matter, to any of the other cities within Los Angeles County.  In fact, the County had to receive after-the-fact special state legislation that allowed them to grab the 0.25% that would have otherwise been available to cities like Burbank.

According to the survey mentioned earlier, 90% of the respondents favor a requirement that all funds from additional taxes be used in Burbank.  That seems preferable to having to pay an additional ¾% anyway, but to some other agency with no special accountability to Burbank voters.  And if the recently approved Measure H is any indication, there may not even be one dollar of revenue flowing back to Burbank.  Think of what the City, with active citizen involvement, could have done with the $8.0 million now captured by Measure H.

Active citizen involvement is key for the success of Measure P. Burbank voters definitely want accountability: 69% of the survey respondents want to require audits, and 68% want to require citizens’ oversight over any additional revenues raised.

The City Council has heeded the calls for accountability over the use of additional revenues. Measure P explicitly calls for oversight of the use of the additional sales tax revenues.  At Council direction, staff is working to create a new board and strengthen others:

  • Create a new Infrastructure Oversight Board that includes City residents. Responsibilities would include, at a minimum, annual review of proposed infrastructure spending as well as the status of funded projects. 
  • Expand the responsibilities for the existing Retirement Plans Committee to include at least an annual review of the City’s pension funding and benefits.
  • Expand the responsibilities for the Audit Committee to make sure, among other things, that all Measure P proceeds are used in the City of Burbank.

It’s worth mentioning that the City has a track record of being available to citizens and businesses.  It hasn’t hurt that the City has had more than its share of watchdogs, especially during times of controversy.  And while the quality of the watchdoggery has been highly variable, the overall effect has led to a City government with a healthier regard for public opinion.  Having additional oversight for Measure P funds would be in keeping with the City’s culture of citizen involvement and so would be more than a rubber stamp exercise.

The City Council is committed to making Measure P revenues a genuine increase in capital funding. The Council will establish a baseline of capital funding based on the past several years.  Any Measure P funds devoted to capital improvements are to be in addition to this baseline capital spending rather than a substitute for it.

The Council is also requiring that the annual normal cost of the City’s pension plans be funded, with explicit and transparent funding goals that would allow the City to absorb future pension funding charges.  If this policy had been in place in the 90s and early 00s, a substantial pension “rainy day” fund could have been created.

Can enough costs be cut to avoid raising taxes or cutting services?

Measure P appears to be politically viable, and far preferable to reducing the scope or quality of customer services.  Beyond the pension reforms for new hires mentioned earlier, can the City find ways to cut enough costs so that it can avoid raising taxes altogether?  

The number of budgeted positions has significantly decreased.  Over the past 20 years General Fund staffing had roughly fluctuated between 934 and 1,023 full time equivalent positions; but several years ago, the number of positions has continually decreased, dropping to 903 positions.  When redevelopment ended in 2012, most of the 21 budgeted redevelopment positions were eliminated.  Staffing was retained for the real estate section, which had traditionally been a planning function and for which there was an ongoing need.  

The General Fund continues to provide various administrative services for the proprietary funds.  The consolidated approach makes these services more labor efficient; and the General fund is reimbursed for the shared support through its cost allocation plan.

Significant new cost cutting is underway. The City has in fact identified several savings initiatives that, if fully realized as planned within four years, will generate $7.8 million in savings without hurting city services:

  • Have all employees, not just new hires, pay 50% of their pension costs, a greater share than many employees pay presently. Serious discussions are underway.  Estimated savings: $3.7 million.
  • Avoid paying more in salaries that what market competitiveness demands. Estimated savings: $2.0 million.
  • Improve worker safety and reduce lost hours due to injury, which will enable reduced Workers Compensation costs. Estimated savings: $1.2 million.
  • Pre-pay the CalPERS Liability annually. Estimated interest rate savings: $0.9 million.

Note that $3.7 million in savings would come from General Fund employees assuming a greater share of the pension payment burden, and to that extent reducing the potential burden on taxpayers.

A fee study and fee changes have already been completed, which are expected to generate $1.2 million.  These targeted fee increases are preferable to a general tax increase, especially when coupled with the introduction of the PASS program, which allows lower income residents to pay reduced fees for many City services.

In total, these measures could reduce the operating deficit to $9.5 million by FY 2022-23.  But that’s still a big deficit, and capital funding needs remain unaddressed.

The freeze on hiring and compensation will generate several million in savings.  Of the 903 budgeted General Fund positions, a total of 112 person years’ worth of staffing has remained vacant due to the hiring freeze. The General Fund budget is $168 million, with about 80% due to wages/salaries and benefits for the 903 budgeted positions.  Doing the math reveals that each budgeted position is, on average, $150,000 per year.  For 112 positions that totals to $16.8 million per year.

However, it would be a mistake to suppose that most of the $16.8 million would be available as savings.  In many cases, existing staff has had to work extra overtime, at time-and-a-half or greater, to maintain service levels in spite of the vacancies.  For example, 15 vacancies are sworn positions that often must be filled in with overtime to maintain minimum readiness levels. Moreover, some maintenance has been deferred and must eventually be done. 

Nevertheless, there’s likely is to be several million or so in one-time net savings by the time most of these positions are filled, which would take about a year.  And some vacancies may well be permanent; the hiring freeze is an opportunity to increase labor efficiencies without layoffs. 

The decision to save budget surpluses has led to a $14 million spendable balance (i.e., beyond required reserves, in the General Fund.  Even in a typical year, there are a certain number of vacant positions that arise from retirements, resignations, etc.  The resulting net salary savings had been customarily treated as a spendable surplus.  But over the last several years, the surpluses have been accumulating instead, and can now be used to defend against pension liability payments when they are higher than currently estimated. 

Or, they can accelerate the reduction of the pension liability when required payments are lower than estimated. A long-term cost reduction had already occurred in the recent past, when the General Fund was receiving monies from Redevelopment as a consequence of its dissolution. Former Mayor Gary Bric, who served on the Council from 2007 to 2015, recalls successfully advocating for using these monies to pay down some of the pension deficits, which has been saving the City $750,000 per year. 

Or, the spendable surplus could also be used to tackle the General Fund’s needed capital improvement projects sooner rather than later.

The City has achieved a running start on the General Fund’s looming challenges.  The $14-plus million (keeping in mind additional savings from the hiring freeze) can stave off an immediate crisis but without Measure P revenues, the annual operating deficit of $9.5 million would exhaust this amount within two years. 

Attempting to generate $9.5 million purely through staff cuts would require hundreds of permanent vacancies, with resulting drops in service levels that even huge overtime expenses could not overcome.  Parks and fire stations alike would face closures.

But with Measure P revenues, the $18 million could remain available indefinitely.  While the Council and citizenry is considering the best use of these funds, they will be earning around 5% ($900,000 per year) in a special trust fund, versus the usual rate of 1.5% ($270,000) per year. 

So there’s good reason to believe that the City can mitigate General Fund operating and capital budget shortfalls through internal savings, but it would also need to have at its disposal Measure P revenues.

Letter to the Editor: Residents Support Measure QS

Letter to the Editor:

We are voting yes on Measure QS and you should too.  One of the things that makes Burbank such a great city and a wonderful community is the public school system. In addition to our own utility and Fire and Police Departments, my wife and I bought a home here over thirteen years ago because of Burbank’s  schools.  Burbank Unified students, including ours, enjoy access to lower class sizes, fantastic teachers, a robust arts program, wellness programs, and STEM and GATE programs.  The state is only funding the  local school systems at the 2008 level, and without our passage of this measure, some, if not all, of these attributes will be deeply impacted.

Having a great school system benefits all of us. As property owners, it increases the value of our homes and makes them more desirable to potential buyers or renters. Businesses want to be located in a vibrant city and great schools motivate employees to want to live and work in the same community.  In addition, our senior neighbors will not be negatively impacted.  All they have to do is submit an exemption request. An adequately funded school system provides the instruction and programs that prepare today’s students to be tomorrow’s leaders, the next generation of Burbank doctors, lawyers, police officers, firefighters, community activists, teachers, business owners, etc. We need to join together as a community to support our schools and vote to provide the additional funding that this measure will provide.  For us it’s about $14 per month and we know it’s well worth the investment. A vote for QS is a vote for quality schools, a vote for stronger community.

Sincerely, Cindi and Brian Smith

Vote For Measure V and Measure Y

Elevator speech  

Local governments should make voting as convenient as possible.  At least at the local level, when more people vote they get greater accountability from their elected officials.

That’s why we urge you to vote for Measure V and Measure Y on June 5.  They will increase voter participation by mandating that local election in even-numbered years when larger percentages of the voting public are turning out to choose governors and presidents.

Some details    

Many more voters go to the polls to elect a governor or president than to elect a council or school board member.  For example, 33,106 Burbank residents voted in the November 2004 Presidential Election. That was nearly two-thirds (more precisely, 63.8%) of Burbank’s registered voters (51,893 at the time.) But in the “off-years,” when candidates vie for seats on the City Council or School Board, voter participation plummets to between 15% and 20%.  If a particular issue rules the voters the percentage may climb to 25% or 30% as it did in the 1980’s when high rise development and airport noise policies were hotly contested.

Otherwise, local elections tend to be decided by “core voters,” according to Burbank City Clerk Zizette Mullins, “who’ve been in Burbank many years, seniors especially.”  But Mullins goes on to say, “Younger families who have just moved here are also wanting to make a difference in Burbank.”  That’s understandable. Families have a big stake in their children’s education and in the safety and quality of their neighborhoods.

Even if their numbers are small, why not let the residents who care enough to vote to be the ones to call the shots?  If the nonvoters complain about the outcome, they have only themselves to blame.  It’s a tempting position to take, especially if we’re frustrated by voter apathy.

Except that local governments are supposed to be serving all their constituents: not just on paper, but in reality.  Private companies want to make it as easy as possible for their customers to provide feedback about their products and services, so as not to be blindsided into bankruptcy.  Having only 15% to 20% of your customers satisfied doesn’t cut it.

But can’t local governments get away with having a sullen public as long as they don’t bother to vote? Not for long. People and businesses don’t just vote in the booth; they vote with their feet.  The golden taxpaying geese can fly away.  And sometimes the hoi polloi suddenly mount recalls or field opposition candidates that seem to come out of nowhere. That’s what happens—and has happened–to officials who were only paying attention to a narrow sliver of their constituencies.

Trouble is, voting with your feet can be very life-disrupting.  Far better to hold elected officials’ feet to the fire.  In Burbank, it’s not all that hard to buttonhole a council or school board member; this isn’t LA.  And most local elected officials have many friends and neighbors in the community: they want to look good to their peers the way high school quarterbacks want to look good to their classmates.  We’re not talking about distant bureaucrats.  These people have skin in the game.

So it’s in everyone’s interest to make it easy for a Burbank resident to vote for local candidates and issues.  And the logical way to do it is to make local elections coincide with statewide and national elections.  That’s why the State legislature enacted the “California Voter Participation Rights Act” that mandates local elections in even-numbered years if there has been a significant drop in voter participation in odd-numbered years when local elections have been traditionally held.

And that’s why both the City Council and the School Board support these measures as well.

One wrinkle: Burbank is a Charter City with its own election procedures written into the Charter.  An argument can be made that therefore the State legislature can’t mandate even-numbered year elections, notwithstanding the contrary legal opinion of the State‘s Attorney General.  But our own City Attorney could simply take the position that Burbank’s support of even-numbered year elections is without prejudice to its status as a Charter City. 

Another argument for Measures V and Y:  A Charter City does give its voters a greater freedom to enact measures without a by-your-leave from the State legislature.   Local control is good if the locals are truly in control.  In the case of the Charter City of Bell some years back, the local council was passing outrageous fees because on the one hand, the State legislature had no power to prohibit them; and on the other hand, the voter participation was extremely low.  So having a Charter City is great when you have an active citizenry.  It’s an invitation to corruption when you don’t.

So please vote for Measure V and Measure Y on June 5.

OPINION: Vote “YES” On Measure T

Editor’s Note: The following is an editorial that represents myBurbank and has been authored by Greg Simay for us. We will be glad to publish letters to the editor from opposing opinions.

The elevator speech (if you’re in a tall building, like in Dubai)

The City budget that supports police, fire, parks, libraries and streets has been facing a $30.5 million shortfall, with catastrophic reductions in service—a nightmare for the City Council and the public they serve. That’s the bad news. The good news? There are solutions:

  • Vote for Measure T by June 5, and you reduce the shortfall by 12.5 million, from $30.5 million to 18 million. It assures that a revenue source the public has supported since 1958 remains in place with up-to-date language.  It doesn’t increase your electricity rates or your taxes.
  • The City has created $9 million in savings, which includes having employees contribute more toward their retirement. Now we’re down to a 9 million shortfall.

The City has $14 million beyond its emergency reserves ($33 million) to buy a year’s time to find a permanent cure for the shortfall, which is:

  • To pass a ¾% increase in the sales tax, hopefully next November, which would raise $20 million annually, wiping out the $9 million shortfall and providing $11 million toward roadway and other capital improvements. It does mean that when we pay for that $10 item, the sales tax on it will be 102.5 cents instead of 95 cents.

We know that Burbank is a city that works and works very well.  Property values are sky high for a reason.  So vote “yes” on Measure T and support an increase in the sales tax, when that ballot measure comes up later on.

Now for the details

Only the General Fund part of the City’s budget is in trouble.

Some City services (including water and electric services, and refuse) are supported by rates.  Rate revenues flow into various proprietary funds, and expenses flow out of them. 

Other city services are supported by taxes and certain fees.  These services include those provided by police officers, fire fighters, park and recreation staff, library staff and those maintaining City streets.  Tax revenues flow into the General Fund, and expenses flow out of it.  Besides ongoing expenses, the General Fund also supports capital improvements, either on a pay-as-you-go basis or by servicing the debt on borrowed monies, usually from bonds.  Currently, the City is debt free.

The proprietary funds are in good shape.  The budget shortfall concerns the General Fund only.

The In-Lieu Transfer Fee, which provides revenues that a private utility would otherwise provide, is at legal risk, which puts $12.5 million of revenue at risk.

One source of General Fund revenue has been an in-lieu transfer fee, in which the Electric Fund (a proprietary fund) transfers some 12.5 million to the General Fund.  The in-lieu transfer fee cannot exceed 7% of the revenues from electric rates paid by residents and businesses, which is what the fee currently equals.  

If Burbank Water and Power were a private utility, it would be paying a franchise fee for the privilege of having stations, power lines and other facilities in Burbank. For example, the current cable provider pays the City a franchise fee based on 5% of its retail revenues. 

But as just mentioned, Burbank’s in-lieu fee equals 7%, not 5%.  What is the extra 2% for?  It’s for street lighting, including its ongoing expenses and capital improvements. Even without their own electric utility, many cities are responsible for maintaining their own street lighting systems.  By having its own BWP take care of its street lighting system, the City is able to do so very economically without giving up policy oversight.

But if BWP didn’t have to transfer the other 5%, couldn’t electric rates be lowered correspondingly; or perhaps more realistically, couldn’t any future rate increases be delayed even further than they have been?  Yes they could, but BWP’s electric rates are already very competitive with those of other Southern California utilities, public and private.  BWP has been achieving economies both by creating additional revenue sources (from fiber optic services, spare transmission capacity, etc.)  and continually improving the efficiency of its operations and maintenance.  It doesn’t need to discontinue a decades-old revenue source to the General Fund in order to do right by the ratepayer.

Put another way, the marginal benefit the electric ratepayer may receive from the elimination of the in-lieu fee would be offset by a significant reduction in one or more City services that depend upon the General Fund.

Passing Measure T guarantees that the in-lieu transfer fee would meet current legal standards, thereby safeguarding the $12.5 million per year.

So why is the in-lieu fee at risk?  After all, according to the Supplemental Voter Information pamphlet, Burbank voters, way back in 1958, had amended their City Charter (specifically, Section 610) to approve “a fee in retail electric rates to fund the transfer of no more than 7% of BWP’s gross annual sales of electricity to the City’s General Fund in order to pay for essential City services.”  But as a result of a legal challenge to Section 610, the court in 2017 found “voter-approval requirements for a tax were not met because Section 610 did not explicitly [our emphasis] authorize funding the transfers from retail electric rate payers.”  (This was in spite of the voters having approved a Charter amendment to Section 610 back in 2007.) The court ruled that the in-lieu transfer fee is therefore a tax, subject to fresh voter approval. 

That part of the decision would have been manageable, but the court had also ordered the City to stop collecting the fee. To stave off an immediate funding crisis, the City quickly appealed the decision, which suspended the court order pending the outcome of the appeal.  BWP has been able to continue collecting the fee and make transfers to the General Fund, but as of September 2017, the monies are currently in limbo in a holding account.  As of now the amount held is $5.1 million.

If the court rules in the City’s favor on appeal, all well and good.  The $5.1 million returns to the City’s coffers and from 2018/19 onward, the in-lieu transfer continues to be a revenue souce.

But if the appeals court agrees with the lower court, disaster would loom.  The City needed another bite at the apple, one that could survive any future court challenge.  Hence the City Council’s decision to propose Measure T  in which a new, “Section 610A” amendment to the Charter “explicitly approves the existing practice of including a fee in retail electric rates to fund transfers to the General Fund.

So if the voters approve Measure T, the in-lieu transfer is safe, regardless of how the appeals court rules.

The City has taken steps to make its FY 2018/19 expenses by $8 million less than they would otherwise be, in part by having new and current employees pay a greater share of their retirement.

If Measure T passes, the $30.5 million General Fund shortfall becomes a 18 million shortfall.  The City could reduce the number of employees, but only at the cost of triggering a corresponding reduction in services.  (And avoiding cuts in police and fire services would make the cuts even direr for other services like parks and recreation, library and street maintenance.)  The Burbank voter, and various watchdogs, have made sure that more employees has translated to more and better services.

So how can the City reduce costs without reducing services? It turns out that one way was making the workplace significantly safer, thereby reducing workers compensation costs.  There have been, over the years, improvements in work efficiency, particularly as the workforce has become more computer literate.

But the budget elephant in many City Council chambers in California, and across the nation, are underfunded employee pension obligations.   To void, even partially, current obligations is a serious violation of contract.  But to make deep cuts in City services is a serious betrayal of the public. 

At the State level some pension reforms have taken hold (such as salary caps,) but ultimately, current employees will have to fund more of their pensions.  The City Council has adopted a policy that employees should pay 50% of the pension annual normal cost.  Once fully implemented, this policy will result in $3.7 million in annual savings.  (The City also plans to continue prepaying the annual unfunded CalPERS  unfunded liability payment, so as to avoid interest costs.) Policies  that require a higher percentage of employee contributions also allow CalPERS to depend more on current contributions rather than achieving  higher-than-market rates of return. 

CalPERS had, during the go-go 90s, achieved very healthy rates of return, and in 1994, the retirement system was 140% funded on a statewide basis.  But high rates of return can be volatile as well; during the Great Recession, CalPERS had a 25% loss in one year.

Today, the statewide retirement system is 80% funded. A wiser CalPERS now aims for lower-but-more-stable returns on investment, recently lowering their overall rate-of-return target from 7.5% to 7%.  These lower returns can meet pension obligations if employees are putting more in the CalPERS kitty in the meantime.

During the 90s, the City Councils could have decided to keep contributing to CalPERS for those rainy day years when surpluses shrink and turn into deficits.  They could have decided to resume payments in 2004, when the surplus had shrunk to zero and CalPERS was 100% funded.  But City projects—good, popular projects—beckoned.  And so the elephant grew.  Recent threats to the City’s revenue stream like the loss of the transfer fee has been a wake up call to tackle the elephant before it smothers everyone in the room.

A ¾% increase in the sales tax will be needed to wipe out the remaining, $9 million budget shortfall and to provide capital funding for city streets and other needs.

The net result of the City’s cost saving efforts so far has been to reduce costs by about $9.0 million beginning in FY2018/19.  Along with the passage of Measure T, this reduces the shortfall to $9 million, as against a FY 2018/19 operating and maintenance budget of $167 million.

The City does have fully funded reserves of $33 million, but this money would only be used in the severest of emergencies or more likely, as a bridging loan for a short period, with the assurance that permanent funding was at hand.  The City also has $14 million beyond these reserves; if this amount were used to cover an ongoing 9 million shortfall, it would be exhausted by 2020.

Which leads to the proposal of a ¾% sales tax this coming November.  The current sales tax in Burbank is 9.50% so the new sales tax rate would become 10.25%.   The extra ¾% would produce extra revenues of $20 million annually, covering the $9 million shortfall and providing $11 million for needed capital improvements.  The tax burden’s pretty evenly spread: About one-third of the $20 million would come from Burbank residents, about one-third from Burbank businesses and about another third from non-Burbank residents. 

The implicit assumption is that the ¾% would not reduce consumer buying and thereby the $20 million would be the revenue generated from the increase. For every $100 spent, the ¾% additional sales tax would mean that the sales tax amount increases by 75 cents, from $9.50 to $10.25.  For 10 dollars, it’s a 7.5 cent difference.  Whether the local economy heats up or goes down, it will probably be due to other factors.  

A lot of Burbank roadways are in need of repaving, a capital expense, rather than patching, an O&M (operations and maintenance) expense. (On a household level it’s the difference between replacing a roof and patching it.)  Most streets need repaving on shorter time frames than payment schedules for long-term bonds, so long-term financing is dicey. (It’d be like paying for a car long after it’s consigned to the junkyard.)  Pay-as-you-go is a safer route and one that the extra ¾% would provide.

Redevelopment had been a way of funding many capital improvements through tax-increment financing.  That is, the increases in property tax revenue from redeveloped properties would flow to the City rather than the County. These funds didn’t flow into the General Fund, but they were used for projects that would otherwise have been paid out of the General Fund. So the General Fund still benefitted.  But under its own budget pressures, Sacramento discontinued redevelopment several years ago.

The Grand Bargain

The Burbank Unified School District also needs additional funding.  Details are another discussion for another time. But consider this proposed bargain:

Burbank’s local government agencies will continue to make Burbank safe and offer a very high level of services for ourselves and our families  The streets will be kind to our cars,, the libraries will be useful and the parks will be fun.  If there’s a hillside fire, it won’t consume our houses because our fire fighters will continue to have the ability to be Johnny-on-the-spot.

Our schools will be safe and so good that many of us parents will decide we don’t have to bear the additional expense of private schools.  (And even if we nevertheless decide to pay for a private school, we will sleep easier knowing the public schools are a more-than-decent Plan B, should a Plan B become necessary.) 

The City Councils and School Board will continue to work together to the benefit of the Burbank community. 

And so in Burbank, there will be a significantly greater chance that our children will grow up safe, graduate with skills, have great local employment opportunities, and successfully launch into adulthood earlier and with considerably less debt than their peers elsewhere.  And, everything else being equal, the value of our houses will continue rising because a city that offers what Burbank offers will be a highly desirable location, location, location.

Is this what we want?  If it is, then let’s heed the Spanish proverb:

Take what you want. Take what you want, and pay for it.

Rizzotti Announces Intent to Run for Burbank Council Seat

Chris Rizzotti

Chris Rizzotti

Lifelong Burbank Resident Chris Rizzotti has announced his intention to run for the Burbank City Council. The primary election, to be held early in 2015, will see candidates vie for two open seats.

Mayor Emily Gabel-Luddy and Councilman Gary Bric will both be up for re-election, with neither having made an official announcement about their intent to run again.

 

Here is the Rizzotti announcement, along with information that he included:

It is with great excitement I announce that I will be a candidate in the next election for Burbank City Council. I have lived in the City of Burbank my entire life and built a strong business in this city that I love. With a strong desire to serve, as I now do on the Planning Board, I would consider it an honor to represent the citizens of Burbank as a City Councilmember. Nobody will work longer or harder than me to insure that our City remains the standard that other Cities aspire to.

I will lead with emphasis on positive involvement between our citizens, our elected and our City staff. Working together, with all being vested, will have the highest and greatest impact on the whole.

Broker & Owner- Rizzotti Real Estate

–         2013 Named Burbank Association Realtor of the Year

–         2013 President, Burbank Association of Realtors Community Service Foundation.

–         2013 Core Team Measure S Campaign for Burbank Schools

–         2013 City of Burbank Planning Board

–         2012 President, Burbank Association of Realtors

–         2012 Director, California Association of Realtors

–         2011 Vice-President, Burbank Association of Realtors.

–         2011 Director, California Association of Realtors

–         2009 Graduate- Leadership Burbank

Served on numerous Boards & Committees throughout the years

-Burbank Bike Angels

-Burbank Police Foundation Hoof & Woof Committee

-Burbank YMCA

-Family Promise

-Burbank Airport Study Group

-Burbank Young Life

-The Animal Protectorates

Candidates Respond: Burbank City Council Race

Editors Note:  After deciding not to endorse any candidates, it was decided instead to ask some of the tough questions that would have be dealt with during the next four years.  Some of these questions were sent in by readers and others picked by our staff.  All of the candidates were given a week after having the questions emailed to them. They have been re-posted in their entirety without any editing whatsoever.   Please take what these candidates say seriously while also considering the candidates who were unable or refused to respond and their possibly reasons why. Whatever, it is now up to you to decide.

Note 2 – Dr. David Gordon’s answers were received late, but have been included – it is important that all candidates have an opportunity to have their positions read.

Burbank City Council Race

Candidates David Golonski, Dr. David Gordon, David Nos and Jess Talamantes were asked the following questions:

MB BOX myBurbankOne of the first duties for the new City Council is to hire a new City Manager. Many believe Bud Ovrum to have helped steer Burbank through the economic downturn by his diversification of businesses, helping to bring in many different types of businesses. Are you looking for someone from the inside who knows Burbank or are you looking nationally to find someone. What qualities are you looking for? Also, are you in favor of doing a search for a new Police Chief when you have one in place who would like to keep the job after bringing ion several reforms and new personal into the department?

Dave-Golonski

Dave Golonski

We are conducting a national search for a qualified individual to become Burbank’s next city manager. Economic development was definitely one of Bud Ovrom’s strengths and will be an important quality that we will be looking for in the next city manager. The city manager that I would like to see for Burbank will be someone that has significant experience in running an organization similar to Burbank as well as someone that can relate well to the community. The individual will need a strong financial background and have a proven track record of building a strong organization and working well with labor organizations and diverse community groups. I have been impressed with the reforms that have been instituted by our current police chief and his command staff.

 

Dr. David Gordan

Dr. David Gordon

The Council is conducting a broad search for the best-qualified individual to fill the big shoes of Burbank’s next City Manager. However, due to the many rules and programs uniquely applicable to California cities, I would tend to look first to a candidate’s skills and experience understanding and effectively applying California State laws, programs and regulations. The successful candidate would likely have solid experience and background effectively dealing with labor issues and preferably have a positive history dealing with a city owned utility, city based police and fire departments, and/or familiarity with a joint power authority such as we have at the Burbank airport. I question the wisdom and necessity of doing a search for a new Police Chief when we currently have a highly skilled and experienced Chief who has demonstrated exceptional ability in righting a listing ship as well as having particular experience in handling the ongoing legal matters challenging our Police Department.

David Nos

David Nos

The City Manager is the most critical position within the City. Without a good City Manager the overall operation of the City flounders. This job requires an individual with tremendous drive, vision, and leadership skills. This person must be highly adaptable in order to deal effectively with bosses that may change every two years. A person who worries about job security will not do well in this position. The City Manager must feel strong enough about his/her convictions to disagree with the council if need be – and he/she must be able to motivate and direct staff in all the different departments so that the City runs smoothly. It will help to walk on water, but then maybe I am asking too much.

Someone who knows and understands Burbank would be a plus, and we owe it to the Burbank residents to get the best person possible. We won’t know that until we make a national search. Someone who has the skill levels that I mentioned above will be able to absorb and learn all the qualities that make Burbank the unique City that it is. I would expect the new City Manager to formulate an on-going vision that will help direct and catapult Burbank into a successful profitable sustainable future.

Chief La Chasse was brought in over 3 years ago as the “Interim” Chief. It seems a bit long to hold onto someone in that position without either going for the search, or offering that person the job. If in fact Chief La Chasse wants the job, it should be offered to him. We are cutting costs to balance the budget and it seems senseless to go on a search when we basically have a permanent Chief in place who just needs a title adjustment.

 

Jess Talamantes

Jess Talamantes

Did Not Respond

 

 

 

MB BOX myBurbankThe City Council has approved 4 consecutive Utility Rate increases while also approving a 21% pay raise for BWP GM Ron Davis, and 7-11% pay raises for Sr. BWP Mgm’t. BWP also spend $40 million recently on a “green” “sustainable” Eco Campus. Now we’re being forced by the State to spend $Millions to buy energy we don’t need in order to meet State renewable-energy mandates. What can we do to stop these massive rate hikes and pursue sensible, cost-effective renewable/green energy policies?

 

Dave-Golonski

Dave Golonski

Burbank currently has the lowest utility rates in our region. We have just put in place the last piece of our renewable portfolio plan that we believe will allow us to meet the renewable portfolio standard mandated by the State. We haven’t had “massive” rate increases even in the face of significant increases in costs. We need to recruit and retain talented people to run our utility and to find ways to keeps our rates low. The $40 million dollar investment was necessary to maintain our aging infrastructure. Around $20 million of this was to replace the Burbank distribution substation which was needed to maintain the reliability of our distribution grid. The remainder was for the administration building, warehouse and service facilities that were in need of seismic upgrades. These investments are long term improvements that will make our utility more efficient and reliable over the next 50 years. The modernization of the warehouse operation will result in significant cost savings over its lifetime.

 

Dr. David Gordan

Dr. David Gordon

It never made any sense to me to repeatedly raise utility rates and I consistently voted against them. The double-digit pay raises to BWP top management was unacceptable to me during a severe recession, high unemployment, and general fund deficit. I voted against those as well. It seems to me whatever precious City resources were spent on the so-called “Eco-Campus” were ill timed and inappropriate considering the current economy and ratepayers struggling to pay their utility bills. The millions of dollars Burbank is being forced to pay to comply with State mandated renewable energy quotas, that is, according to BWP Director Ron Davis, “energy we don’t want and we don’t need,” is simply outrageous and unjustifiable. The City must take every available legal action to challenge and protest these crippling, agenda driven, unaffordable surcharges and not just buckle under and claim, “our hands are tied!”

David Nos

David Nos

While I appreciate Mr. Davis’ business acumen and his approach to running the BWP, I am confused as to why a City who has been doing budget cuts ranging from 2% to 10% over the last 4 years needs to be cautious about salary increases. While I am not privy to the contracts of Senior Management staff at the BWP, from a conservative standpoint salary increases should be frozen during periods of budget cuts, and in some cases salary cuts will be appropriate.

In a meeting I had with Mr. Davis we discussed the Eco campus. Burbank does a great deal of power brokering. i.e. we sell the extra power we are not using. This helps bring a positive cash flow to the BWP. As I understand it the Eco campus was funded from power we sold to other cities such as Anaheim. During this meeting we also discussed the renewable energy mandates that we face. Burbank has been fortunate that Mr. Davis, through effective buying has been able to buy renewable power at lower rates than many other cities. As a result we can sell that power at much more competitive rates which helps defray some of the high costs that are associated with renewable energy.

I understand the State’s desire to start moving away from fossil fuels, but I question forcing cities to move to renewable power usage while the technology is still evolving.

Buying power at more expensive rates just forces the city to raise the rates to the end-user to cover the greater costs. Solar panels require a great deal of hardware to be effective and they are expensive to produce. Wind towers require maintenance and are unsightly. And don’t forget there are days when the sun is covered by clouds reducing power to the panels and the wind does not blow.

Unless we can get the State to see the downsides of forcing cities to “rush”

Into the renewable energy market we may be stuck. But, I believe we need to try to make the State understand by being aggressive with our legislators and working with the other cities in our region to put pressure on our State’s elected officials to give us some lee way.

In the meantime we need to look at what we can do operationally to cut our usage.

Give financial incentives to our residents for using less power. Work together as a community to reduce the entire City’s carbon footprint.

Renewable energy is the future, but while the technology is available it is not efficient enough to keep from affecting the pocketbooks of our residents.

 

Jess Talamantes

Jess Talamantes

Did Not Respond

 

 

 

MB BOX myBurbankThe City is facing a $2.1 Million budget shortfall and considering a variety of cuts, out-sourcing & fee increases to close the gap while dealing with a $252 Million unfunded Pension liability. What can we do to balance the Budget while addressing meaningful Pension reform? Please outline your specific Budget Plan.

 

Dave-Golonski

Dave Golonski

This year’s budget deficit is actually $1 million not $2.1 million. That’s because of the reduced spending over the last five years through a balanced approach that included employees paying more of the pension cost, finding ways to deliver services more efficiently and paying down our unfunded pension liability. I proposed a hiring freeze until pension reform was enacted, saving millions.

To further reduce spending, we need to continue these approaches with more emphasis on ways to deliver services more efficiently, including outsourcing services that can be performed by the private sector in much more cost effective ways. By acting now, we can do this in a thoughtful way, relying on attrition. I oppose reducing services or increasing fees. One example is changing to leasing police cars as opposed to purchasing them. This doesn’t impact our ability to deliver services, but will result in substantial savings. We also need to evaluate this approach for more of our fleet.

More important than balancing the current budget, we need to identify $8 million in additional savings to pay down more pension liability (resulting in additional recurring savings), increase the funding to repave our streets and invest more in our infrastructure, like our park facilities.

Dr. David Gordon

Dr. David Gordon

Before a meaningful “Budget Plan” can be crafted, all financial information has to be placed on the table. That information has not yet been presented to the Council so outlining a specific budget plan is only speculative. However, there are a few things that ought to be looked at immediately to effectively tighten the belt. We must curtail spending and collect money owed us. We failed to recapture over $40 million in debt owed to our General Fund by the former Redevelopment Agency. Now the State is claiming that money is no longer available to Burbank. It could have easily gone to balancing our current budget, prevented any claimed need for outsourcing our employees’ jobs, fixing a good part of failing infrastructure, and even been used to pay down some of our pension liability. We failed to ever claim the $1 million surety bond due the City following the former Recycling Center’s operator defaulting on his agreement with the City. And we continue to hemorrhage substantial funds through our legal department’s approach to dealing with outstanding Police cases and legal challenges. In addition, we have retained a number of former Redevelopment Agency Employees after the State abolished all such agencies converting their positions to regular city employees. The true, long-term, cost, justification, and wisdom of this move has never been clear to me. The City needs to very carefully review all of its departments and make sure of the needs of each and what the true costs are and ought to be for providing them. Burbank’s taxpayers deserve to know and be reassured that they are getting the full value and best bang for their hard earned bucks. Prudent accounting and spending should be the minimum standard and will likely bring our budget back into balance.

David Nos

David Nos

I would start with encouraging early retirements, and put a hard hiring freeze on non-essential personnel. The budget has to be looked at with a serious eye. If cuts become too serious City services will be affected and this MUST be avoided. We can look at outsourcing, but savings have to be proven and services cannot be affected as a result.

I think we can look at a few things on an operations level that might save long term costs. . Certain lighting technologies need to be looked at. A savings of up to 50% could be possible by converting fluorescents to LED lights. The technology is proven and effective.

Governor Brown’s Pension Reform bill was signed into law in 2012. Effective January 2013, all new employees under the calPERS system would have to contribute 50% of their pension costs. Local government labor unions will have a five-year window to negotiate that through collective bargaining. Annual retirement payout is capped at $132,120. What we have left is the bubble to bring pension costs under control. I have heard from other candidates that we need to “find” $8,000,000 a year to help pay for this.

You don’t find money – you grow revenues by bringing businesses to the city – by encouraging businesses to grow so that jobs are created and tax revenue streams flow into the city. My plan calls for creating a strategic partnership with the Burbank Chamber of Commerce, the Burbank Association of Realtors and the Burbank Community development Department forming a group that will actively pursue new businesses to relocate to Burbank.

This balance of cuts and revenue generation will help us to keep the budget balanced and with proper oversight, we can ensure that we keep our revenue growth ahead of our expenses.

Jess Talamantes

Jess Talamantes

Did Not Respond

 

 

 

MB BOX myBurbankOne of the clouds over the City during the past two years has been the police investigations and lawsuits. With a reported $7.1 million already spent and many more potential lawsuits still to go, do you feel there should be a change of strategy or continue in the same direction.

 

Dave Golonski

Dave Golonski

I believe we should continue in the same direction. I believe Burbank took the appropriate actions to deal with the problems that occurred in the Police Department and needs to see those actions through.

 

 

Dr. David Gordon

Dr. David Gordon

Absolutely! The Council has the responsibility and authority under the City’s Charter to be involved in decision making on legal matters, litigation, settlements, etc. The quality and appropriateness of the Council’s decisions will only be as good as the information upon which they are based. Not allowing Council members to directly question high priced outside attorneys supposedly hired to provide effective legal strategy seems contradictory to their retention. If critically important information is not presented to the Council by redaction or other methods, the Council’s ability to render the best decisions is compromised. The first step necessary to enable the Council to provide clear and meaningful direction in the current Police related legal matters is for it to be provided with all the information needed to understand what happened and who did what when. Absent clear, straight answers to the myriad of outstanding questions Council must either place full trust and faith in the legal “experts,” or accept reaching their decisions about continued legal spending by voting in the dark.

David Nos

David Nos

A change of strategy may just be what we need to do. From what I have been told there are more wrongful termination suits heading in our direction which means more legal fees. Some information that was just read openly at City Council meeting by a concerned resident shows the L.A. Sheriff Department’s independent reviews of the officers in question warranted no further investigation. Yet we terminated these officers, and we are being sued.

Apparently our City Attorney did not have these other documents – I have to ask Why Not?

None of the Council seemed to have this information either. Again why not? We are talking millions of dollars. This MUST be addressed. I must state that I am speaking as an outsider and am missing much of the other detail that the current Council has. But the evidence from this side requires that pointed questions be asked and answers must be given to the satisfaction of the community.

Jess Talamantes

Jess Talamantes

Did Not Respond

 

 

 

MB BOX myBurbankPlease talk about your vision for Burbank during the coming four years. Where can you make a difference? Are you willing to work with other council members for change? What development do you see coming to Burbank or would you rather preserve the residential areas?

 

Dave Golonski

Dave Golonski

I see Burbank becoming stronger financially over the next four years, protecting its services and programs and dealing with the increasing pension costs in a responsible manner. This will set Burbank aside from many other cities in California that have waited for this problem to become a crisis and had to sacrifice the level of service they provide to stay afloat. I believe I can make a significant difference because I understand the nature of the problem facing Burbank and am the only candidate that has put forth a plan to deal with it. I am more than willing to work with the other members of the council to implement change. Actually, that is the only way anything can be accomplished by the City Council. I see some opportunities for development in both the South San Fernando and North San Fernando area, neither of which would negatively impact our residential areas.

 

Dr. David Gordon

Dr. David Gordon

The next four years promise to bring a new air of openness, honesty, and accountability with the voters’ outright election of Bob Frutos in the recent primary. I hope to make a very positive difference on the Council by closely collaborating with and mentoring Bob whenever the need may arise. I believe Bob’s arrival on the Council this May, along with any other deck reshuffling that may occur in the runoff general election, will give the people of Burbank a taste of what true Council dialog and honest deliberation can mean to the City’s health and prosperity. As we emerge from a devastating economic recession, it is reasonable to expect investment and new developments will return. New development can be very beneficial to Burbank and its citizens when it is well planned and done right. Burbank’s IKEA has definite plans to relocate and expand its operation. The Airport is moving ahead with its Regional Transit Center and plans for enhanced rail access. Development plans are taking shape where the former Platt Project had previously been proposed for a high-end residential-retail project. However, I will continue to fight to protect our residential neighborhoods’ quality of life as new projects come forward and are considered. I will continue to insist that all new developments comply with State environmental laws as well as be compatible with their surrounding land uses. I have demonstrated my ability to work with numerous unique and different Council members over the past seven years I have served on the Council. Whether I agree or disagree with the views of those on the Council is immaterial. What is important is that the best interests of the people rely upon Council members working together to provide effective government.

David Nos

David Nos

My vision for Burbank is to ensure financial stability through thoughtful cuts and revenue growth. My vision is that Burbank understands what it really means to be “Green” and we establish programs that set us on this path. One example is using LED lights in the office buildings as opposed to fluorescents (a savings of 40% on lighting costs can be realized).

Being a City Council person requires collaboration with the other members. I certainly don’t profess to have all the answers or all the ideas. We are all individuals and we have strong opinions. Our job is to work together for the betterment of the ENTIRE community. Burbank is Us.

Your question makes it sound like development is a bad word – like we need to draw a line in the sand and pick neighborhoods or development. The operative word is balance. People who live here want the integrity of their neighborhoods to stay in tact. I will work to protect that. At the same time we need to see what can be developed that complements our neighborhoods and serves both parties involved. A bike path down Verdugo does not do that, but one down Burbank Blvd might. A cell tower in a neighborhood church does not do that, but one atop a bill board at Victory and Magnolia might. The job of a City Council person isn’t about choosing sides it’s about leadership and making all aspects of our Community a priority.

 

Jess Talamantes

Jess Talamantes

Did Not Respond