HBT On The Issues: Budget and taxes

*This post is part of a series, “HBT On The Issues,” that lets visitors know where HB Tomorrow has stood on specific issues in Huntington Beach. If you would like to know where HB stands on an issue of interest to you, please contact us at info@hbtomorrow.org.

Huntington Beach is facing projected budget shortfalls in the years ahead, primarily due to rising pension costs. Although the city’s current 2018-2019 budget is balanced, the California Public Employees’ Retirement System (CalPERS) is forcing cities to pay more into the pension system. For HB, this means an estimated $22 million to $25 million in increased costs over the next six to seven years–out of a $373 million annual budget. The city is considering increases in the sales tax, business license fees, utility taxes, transient occupancy taxes, and parking and permit fees. The city is also looking at the legalization of some cannabis businesses to raise revenue, and allowing (and taxing) short-term rentals. On the expense side, the City has floated across-the-board budget reductions and negotiating additional employee pension contributions.

The city does not have a lot of flexibility in its budget. Pension costs, interest on debt and other fixed costs must be paid. More than half the budget goes to police and fire. City staff is down 15% since the 2008 financial crisis when HB had to make cuts, according to the city.  Yet the city’s annual CalPERS contribution has gone up more than 80%. Of 54 municipalities in Orange County, Huntington Beach ranks 51st in pension health, with pensions only 68% funded. In 2011, HB took another hit when the state ended redevelopment agencies, which had allowed cities to capture a larger share of property taxes from counties by declaring some areas as “blighted.”

HBT supports a balanced approach to the budget. Consideration should be given to options that raise revenues as well as cut costs. Given the realities, some city services may fall short of desired in the years ahead, but severe cuts would have a harmful impact on quality of life.  At the same time, HB should work with its employees, sister cities and CalPERS to minimize pension costs.

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