Tag Archives: meeting March 4

How we got into this financial mess

25 Feb

Looking for information about Chico sales tax revenues, I came across a 13 year old article from the Lincoln Institute of Land Policy – “a leading resource for key issues concerning the use, regulation, and taxation of land.”

Using Chico as one of his illustrative models,  Arizona professor Jeffrey L. Chapman discusses “the effects of fiscal stress on local governments in California as they attempt to maintain their autonomy…”  In other words, how cities finance their operations without being taken over by the state.  It’s interesting to read this little prelude to our current predicament.

You can read the whole thing here:  http://www.lincolninst.edu/subcenters/property-valuation-and-taxation-library/dl/chapman_2.pdf

In his opening notes Chapman acknowledges the input and cooperation of then city manager Tom Lando.

In 1999, new housing development was in full swing in Chico.  Hammers were swinging, people were moving to Chico to take advantage of the relatively cheap housing, and construction workers were enjoying a newfound wealth.  The economy was on the way up, and the mule was the construction boom. So, an enterprising Lando decided to milk it for what he could get – he talked council into raising developer fees dramatically.

According to Chapman, “Over time, fees on new development have moved from basically non-existent to now very high. ”

By “very high”, Chapman meant, “Prior to the increases, they were about $2,000 per dwelling unit (for sewer connections) to now about $18,000 per dwelling unit.” This might sound like alot, until you consider “they cover everything from streets, parks police facilities, and bike paths.”

Some people pointed out at the time that this essentially added $16,000 to the price of a new house – I  have to laugh now – that’s chump change compared to the amount houses went up – a house just east of mine sold for $90,000 in 1998. In 2005, a  house just the other side of mine, with one more bedroom and bath, but  on the same size lot, went for over $500,000.

The housing binge provided another revenue opportunity for the city of Chico – increased property taxes.  The housing inventory was increasing as the price was going through the roof. The city was swimming in developer fees and property taxes, not to mention a surging increase in the utility and sales taxes. “If you build it, they will come…” … people were flocking to Chico. Meanwhile, the city was annexing “county pockets” all around the core, dragging in more property taxes, utility taxes and  sales taxes.

At some point in the late 1990’s, Lando had swung a deal to annex Courtesy Motors. Just Courtesy Motors. They wanted an expansion, and a  sewer hook-up, Lando told them they’d have to agree to annex. I’ll never forget the way he grinned as he talked about the sales tax revenues the city would be taking at a Finance Committee meeting. As an added bonus, this annexation created a county pocket of the neighborhood just to the west of Courtesy, which was annexed despite the protests of many of the residents a few years later.

So, if that was the picture in 1999, you might ask, what the hell happened by 2007 that led Lando’s protege and immediate successor Greg Jones to declare we were teetering on the brink of bankrupcty? Where in the heck did all that money go?

It’s funny, already in 1999, Chapman says, “services are increasing, but not in proportion to the population growth, so therefore, slight deterioration.” Meaning, services weren’t keeping up with the burgeoning population.

But why not? Chapman reported, having got his information from Lando,  that development was paying for itself – “Processing fees for new development utilize full cost accounting and include indirect costs. Enterprise funds are fully self-supporting and also include indirect costs. Thus, the fees set by the funds for homeowners are including these indirect costs.” Meaning, the cost of extra cops, street sweepers, more employees Downtown?

No, apparently not. Chapman lists “the police department no longer investigates traffic accidents if there are no injuries…” among other  city policies changes, such as, “The City used to trim trees every 7-10 years; now it will be trimming trees every 27-30 years.”

What can account for a city cutting services just as it is enjoying a boom in revenues? In 2003, the city of Chico, at the direction of City Manager Tom Lando, signed a memo of understanding with it’s employee unions that attached city salaries to revenue increases but NOT decreases.  Is that starting to make sense to everybody yet? Lando’s own salary went from the $90,000 range to over $180,000.  They took huge raises, 14, 19, 22 percent, raising the upper level salaries so quickly that they even created a pretty sizeable disparity between management and workforce. Soon, over 100 employees Downtown  made over $100,000 a year, but the folks that kept the records, tended the public, mowed the ballfields, repaired the sidewalks, paved the streets and collected the parking meter money were still in the $22 – 35,000 range.

Now, at this time, would you believe, we only owed about $120,000,000 on the RDA. I know, “only,” isn’t that a hoot? But now that we how hundreds and hundreds of millions, $120 million seems almost reasonable.

“The first redevelopment project,” reports Chapman, ” started in 1980. Today used quite a bit as is important source of funds. Together, the redevelopment money, the fees and charges from enterprise funds, and the capital funds take a $20 million General Fund budget and turn it into a $50 million city budget.”

Gee, sounds rosy – but get a load of this – “over time, the City Manager predicts that redevelopment may have become less important, since much of the service provision burden is being shifted to new development.”

There’s a glitch. What happened to Lando’s prediction that development was going to “pay for itself”?

Yes, that would be the little matter of the MOU attaching city salaries to revenue increases but not revenue decreases.

Now we find, not only did Lando NOT stop relying so heavily on the RDA as he said he would, but  he started at some point after 2000 paying salaries and benefits out of the RDA.

To me, this article, with the information provided by Lando himself, chronicles Lando’s gutting of our city finances to pay the huge salaries, including his own. I’d call that embezzlement – “the fraudulent appropriation of funds or property entrusted to your care but actually owned by someone else.” Wouldn’t you?

But now this character, with help from at least a few of our city council and, who else but $taff, is trying to shove a sales tax increase up our butts. For what purpose? To pay off the millions in pension promises he made to his $taff – to stave off the Pension Bomb. Cause see, when the Pension Bomb goes off, Lando and all his friends will just stop getting checks. They will have to get lawyers and sue a turnip for their paychecks. I think that’s going to happen anyway, but Lando is trying to hold it off as long as he can, because as former city manager, his name will be on on the poop end of  a few of those lawsuits.

Let’s not forget where the money went:

Name Employer Warrant Amount Annual
ALEXANDER, THOMAS E CHICO $8,947.23 $107,366.76
BAPTISTE, ANTOINE G CHICO $10,409.65 $124,915.80
BEARDSLEY, DENNIS D CHICO $8,510.23 $102,122.76
BROWN, JOHN S CHICO $17,210.38 $206,524.56
CARRILLO, JOHN A CHICO $10,398.98 $124,787.76
DAVIS, FRED CHICO $12,467.78 $149,613.36
DUNLAP, PATRICIA CHICO $10,632.10 $127,585.20
FELL, JOHN G CHICO $9,209.35 $110,512.20
FRANK, DAVID R CHICO $14,830.05 $177,960.60
GARRISON, FRANK W CHICO $8,933.56 $107,202.72
JACK, JAMES F CHICO $9,095.09 $109,141.08
KOCH, ROBERT E CHICO $9,983.23 $119,798.76
LANDO, THOMAS J CHICO $11,236.48 $134,837.76
MCENESPY, BARBARA L CHICO $12,573.40 $150,880.80
PIERCE, CYNTHIA CHICO $9,390.30 $112,683.60
ROSS, EARNEST C CHICO $9,496.60 $113,959.20
SCHOLAR, GARY P CHICO $8,755.69 $105,068.28
SELLERS, CLIFFORD R CHICO $9,511.11 $114,133.32
VONDERHAAR, JOHN F CHICO $8,488.07 $101,856.84
VORIS, TIMOTHY M CHICO $8,433.90 $101,206.80
WEBER, MICHAEL C CHICO $11,321.93 $135,863.16
Please write to Chico City Council and ask them to agendize a discussion of how a tax increase can get on the city ballot.
And don’t forget – Chico Taxpayer’s Association meeting, Sunday March 4 at 11:30, Chico branch of the Butte County library.