Sunday, October 12, 2008

Reason #4. This measure will require cuts in services, increase in taxes, or some both to maintain a balanced budget.

If Proposition T were adopted in to law, and didn't work, it would be bad enough.

If the measure were adopted into law and prevented the construction of the Purple line, and affected our ability to concentrate development where it is most needed and appropriate, it would be worse.

If RIFT were to become law and precluded any chance for the transformation of Lincoln, Pico and Olympic into humane, walkable and sustainable boulevards, it would be even more disappointing still.

If RIFT were in opposition to efforts to promote affordable living, and reduce global warming it would be outdated.

But if Proposition T were to become law and it didn't work at reducing traffic, and all those possibilities for social and environmental progress were precluded or prevented, and THE PROPOSITION WOUND UP COSTING THE CITY BADLY NEEDED REVENUE, that would be a catastrophe!

So, in June, an independent analyst completed their evaluation of the initiative. I encourage you to review this study for yourself, because there are lots of good bits in it that are quite interesting:

Here are some of the highlights of this analysis:

First the report comments on the present condition, by noting that the city of Santa Monica:

  • [Enjoys] A healthy balance between revenues and expenditures, due to a diverse economy and multiple revenue streams, and careful budget management;
  • [That it is] One of very few cities in the U.S. with a triple-A bond rating from all three securities rating agencies
  • [is one where] Residents, businesses and visitors enjoy an unusually high level of service, but
  • [the] Finance Department warns of looming structural deficits in coming years and Public Safety Departments have requested significant additional resources
And here's the thing -- throughout the country, commercial development brings in more revenue than residential development and requires much less in services, and that dear RIFTies is no less true in Santa Monica than anywhere else. In most cities, commercial development is a net postive to the city's coffers, while residential development is a net negative, i.e., commercial development subsidizes the residents.

But the RIFTies have stated that this city has many revenue streams; it does not depend on developer fees for its financial health. That's true enough, but the revenue sources the city does depend on are not from developer fees per se, they include: sales taxes, transient occupancy taxes, business license taxes and parking facilities taxes, all of which are exclusive of residential development. Furthermore, the commercial development cap is likely to significantly effect the value of underdeveloped commercial property, reducing property taxes from those properties.

Okay, you say, but Proposition T, doesn't stop development, it merely slows down commercial development. The city will still see growing revenues under RIFT.

The analysis compares the base-line (as development occurs today) with LUCE (the land use element that the city has been working on and we citizens have been participating in and paying for these last few years) with RIFT. Here's what the analysis shows:

  • In 2023, when all projected space is built, RIFT projection generates $11.4 million less than LUCE ; and
  • RIFT's projection of property tax revenue to SMMUSD and SMC is also significantly reduced over LUCE, say to the tune of $4.2 million/year to the public schools and roughly $880,000 to the college.
With LUCE, by the year 2023 (the expiration date of RIFT) the city is looking at an increase of net revenues (increased revenue - increased costs) of $3.4 million. With RIFT, by that same year, the city is facing a decrease in net revenues of $5.9 million. So the overall difference to the city (in 2008 dollars) is $9.3 million. Again, let me spell this out -- that's net, i.e., after all revenues have been collected and expenses have been paid.

The report concludes:
RIFT’s negative fiscal results would require cuts in services, increase in taxes, or some of both, to maintain a balanced City budget.
Now supporters of RIFT argue that:
....studies, [which ones?] including one done by our own city, [that's interesting, as that's the one I've been quoting, so which are the other studies...I mean really, I want to see them] show that the revenues generated by new commercial projects DON'T MAKE UP FOR their greater environmental costs in electricity, water, waste, and public services."
A curious remark indeed, as page 28 of the study provides an easy to read little bar chart showing the LUCE alternative: $29 million in new revenue - 25.6 million in new expenses associated with that new development= $3.4 million; and the RIFT alternative: $17.6 million in new revenue - $23.5 million in new expenses associated with that new develompent =$ -5.9 million.

By my estimates, this could be as much as 3% of the city's revenue. Given the amount of fixed costs any city has (interest on bond debt, rent, salaries for essential employees, etc.) that's a huge loss for the City. An additional hit will be felt by SMMUSD and SMC. Is it any wonder that teachers, school administrators, school board members, police, fireman and the like are all against this?

RIFT is a revenue sink hole, and tragically, it still won't work.

No comments:

Site Meter Add to Technorati Favorites