Santa Paula Works to Achieve Sustainable Finances

By Sheryl Hamlin

The most straightforward definition of ‘finance’ comes from an American standard, Miriam-Webster: the way in which money is used and handled. The addition of the word ‘sustainable’ with the word ‘finance’ means: the ability to be maintained at a certain rate or level. Simply put: revenues minus expenditures should be greater than or equal to zero.

The challenges facing all governments are 1) the rising costs of services, employees and employee benefits (both existing and retirees), 2) slowing tax revenues due to an aging population whose consumption patterns have changed and 3) an overall decline in birthrate and household formation, two demographic events which historically have generated the need for taxable goods and services.

A City of Grants

As previously reported, Santa Paula’s finances are held together with grants. The SAFER grant has funded public safety, as well as a three year $750,000 matching grant from Limoneira. Both will expire by 2017. In fact, at mid-year FY 2014/2015, over 16% of Santa Paula’s revenues were derived from other governmental sources. The goal of a financial sustainability plan is to rid the city of as many of these outside dependencies as possible.

To that end, the city commissioned two studies: a sustainability plan for the Fire Department which was provided by Matrix for a cost of $50,000 and a poll from Fairbank, Maslin, Maullin, Metz & Associates (FM3) for an amount not to exceed $20,000 to assess the public’s interest in a potential sales tax on the November 2016 ballot.

The Matrix Sustainability Report

The Matrix report was reviewed previously. Updates were requested from the initial report presentation to council. Mr. Finn returned to council on June 6, 2016 with the requested revisions, which he presented. He said that even with the loss of SAFER, they would not recommend layoffs, but would focus on training reserves without rehiring as attrition occurs. One of the Matrix recommendations was either a contract with the county fire or joining the county fire district. The council voted to receive and file the updated Matrix report.

In a 4-1 vote, the council approved outreach to be made by Fire Chief Araiza to the county fire department for the purpose of obtaining financial details about options presented in the Matrix report. These options were only given in general terms by the county to the Matrix consultants. Chief Araiza’s new task could consume 100 man hours, according to City Manager Fontes, for which costs would be associated. Union Representative Chris Mahon spoke strongly supporting the proposal to approach the county. Council Member Tovias said that the Matrix numbers indicate the county option is too expensive. But Chief Araiza reiterated that the Matrix numbers were essentially list price and not finely tuned. Council Member Gherardi said the process has to start and that the city cannot keep kicking the can down the road. Council Member Crosswhite, who voted no, expressed concern that the Matrix report did not consider options for the Emergency Response Service contract with AMR.

Public Polling Results

Dr. Richard Maullin of Fairbank, Maslin, Maullin, Metz & Associates (FM3) presented the findings from the city commissioned poll of 295 voters. He said the poll had a margin of error of ±5.7% which is more than a political poll where a wider sample is used. The complete presentation is available on-line and in the council agenda packet.

The slide below shows a list of concerns of the citizens of Santa Paula.


The polling revealed that 60% of the voters would support a 1% sales tax for 20 years with 84% of those supporting a companion advisory vote to clarify spending and 80% supported a citizen populated advisory committee to monitor the spending. Even the presence of other taxes on the ballot diminished the support only slightly.

The top 5 issues reflected the failed 2014 Measure F issues, according to Council Member Tovias. But Measure F was a specific tax which required 2/3 voter approval. The council has ruled out a specific tax this time in favor of a general tax which only requires a simple majority. Council Member Gherardi asked the consultant to provide maps showing how where the ‘yes’ and ‘no’ votes were located within the city. The council voted to receive and file the report.


Ballot Language

Based on the poll’s hopeful projections, the council voted to have City Attorney Cotti return with ballot language for a general tax containing advisory language and an oversight committee. Mr. Cotti reminded that this must be ready 88 days before the November election.

Several citizens spoke in Public Comments about such language. Dr. Gabino Aguirre and Mr. Bob Borrego stressed the need for youth services. Dr. Aguirre said Santa Paula was a “toxic community” and his group would not support the measure without language for youth services.

Steve Smead spoke against the tax saying a specific tax for one half cent directed at public safety only would meet the most needs with the least cost.

Both Fire and Police union representatives spoke in favor of the 1% tax.

Budgeting for Fiscal Year 2016/2017

The budget for the upcoming year was the topic of a previous regular council meeting on May 16th and a special session, both of which were reviewed here.

The budget exercise started with an estimate of the current fiscal year end balance and a list of “nice to have” line items, if monies are available. According Director Easley’s forecast, the current fiscal year will end with a General Fund positive balance of $313,858 on June 30, 2016; however, the year end net cash flow is slightly negative at ($28,372). In the chart below, the negative $28,372 is subtracted from the General Fund balance to leave a balance of $285,485 to start FY 2016/2017 on July 1, 2016.


With revenue forecast of $14,527,663 and expenses of $14,598,622, the fiscal year 2016/2017 represents a budgeted negative cash flow in the amount of ($70,959). This negative is taken against the projected FY 2016/2017 year end fund balance to decrease it to $214,527. One can see that a few more years of negative budgeting will completely deplete the General Fund Balance unless revenues are obtained. And, in fact, the General Fund balance of FY 2004/2005 was $2,117,709, so this fund has been continually declining.

There was no specific discussion about the negative ($70,959). The exercise at hand during the budget discussion was how to apply potential new revenue from Limoneira and possible items from the ‘wish list’.

The full discussion can be viewed here. At the next council meeting, the Director will provide a straw budget based on the exercise at the June 6, 2016 council meeting.

The exercise ended with a net positive straw budget filled with many uncertainties.

Budget Issues

Aggressive Sales Tax Forecasts

It is important to understand that the FY 2015/2016 General Fund received one-time sales tax revenues from the 2004 Proposition 57 known as the ‘triple flip’. Prop 57 allowed the State to ‘borrow’ .25% of the sales tax from the counties which was repaid by ‘borrowing’ from the education fund which was subsequently repaid from the General Fund through the sale of bonds, hence the moniker ‘triple flip’. This annual “borrowing” has been in effect for almost a decade and has just ended with final monies distributed to make the cities whole again theoretically.

Here is the actual ballot language:

To compensate local governments, the Triple-Flip transferred property tax revenues from a county’s ERAF (Educational Revenue Augmentation Fund) into a Sales and Use Tax Compensation Fund (SUTCF). Because transferring funds out of ERAF results in lower property tax revenues to schools, State General Fund revenues backfill the funds transferred out of ERAF to maintain Proposition 98’s minimum funding guarantee.


According to the tax consultant HDL used by the city, “Santa Paula will receive $142,295.00 First Quarter only SUTCF and $106,217 from Tru-up balance of 2014/2015 closed out in May/June 2016”. These are one-time funds. To view the sales tax for the last decade shown together with the monies received annually from the triple flip, the following chart was created from data provided by Sandra Easley, Finance Director.


Although the chart does not go back to the beginning of the triple flip in 2004, the amount received in FY 2015/2016 has been calculated from that first year when the cities did not receive full compensation from the “borrowing”. So what the graph above shows is the actual sales taxes in red, a return of “borrowed” monies in blue and the total of the two in green. Because in the first year, the SUCTF was only three quarters, the cities are now receiving monies to make the first quarter of FY 2005-06 complete. In Santa Paula’s case, this amount is $142,295. The tru-up is the adjustment amount from the prior period’s estimate, which is $106,217. Here is an explanation of the tru-up from an excellent document with graphs called “Triple Flip Unwind” by California City Finance.

“Because the amounts provided by DOF for funding each SUTCF are estimates, there is a “trueup” adjustment each year to account for actual revenue collections. The “true-up” adjustment Is added to or deducted from the SUTCF payment in the following year.”

The actual FY 2015/2016 Sales Tax collections (estimated) is the red bar ($2,200,000.00). The city is forecasting $2,476,000.00 (red and green bars) for sales tax in FY16/17 which is an increase of $276,000. This appears aggressive, although the forecast was provided from HDL, particularly because only the $106,217 tru-up amount was recently collected sales tax. The $142,295 is from a decade ago. According to HDL, their forecasts can vary from 1% to 3%.

Although California is an exceptional state blessed with high earners, sales taxes nationwide seem to be in a trough as shown by this report from Liscio cited in the Daily Shot, an economic blog used by Danielle Booth in her analyses. The sales tax forecast of $2,476,000 should be reduced.


Consultant Fees

The city owes Matrix $50,000 and the polling company some amount of money. It was not stated in which year these funds will be applied, but in any event, they contribute to the negatives for both FY 2015/2016 and/or FY 2016/2017.


There is a cost associated with Chief Araiza’s new assignment that must be inserted into the FY 2016/2017 budget.

Revenue from Enterprise Funds

The city has been regularly taking $1,000,000 from the Enterprise Funds as a source of revenue. The table below taken from the May 5, 2016 council packet shows the last two years plus the upcoming budgeted year with approximately $1,000,000 transferred from water and sewer funds:


Ratepayers are concerned about rate hikes and comingling of fees, as this suit in Apple Valley shows, charging that the city is violating Proposition 218 with its use of enterprise fund revenues. Are these funds indeed associated with services provided by the city or is this again a case of ‘aggressive’ budgeting?

Effect of Proposed Sales Tax

There is no line item in the budget for the potential effect of the proposed sales tax. Presumably if the measure were approved in November, the tax would go into effect in calendar 2017, which would be mid-2017 for much relief. However, this calculation should be attempted. A sales tax will provide relief for a period of time, but because employee costs are rising faster than revenues, governments and agencies are always chasing more revenue.

Limoneira Revenues

The city has been awaiting revenues from Limoneira’s East Area One project and its associated retail project since 1998. Now called Harvest at Limoneira, there was considerable discussion about adding revenue for permit work into the budget. It was added, but the amount should be solidified soon.

Where do we go from here?

In an era of layers of financial legislation, competing constituencies, declining population growth, stagnant wages, massive generational shifts in spending patterns and 20th century paradigms of growth and profitability under stress, managing finances is not a task for the faint of heart. As the world population approaches ‘peak youth’ in 2020, where the percentage of people over 65 is greater than the percentage of people under 5, many historic assumptions of finance are being challenged and rising taxes will become the norm.



For more information about the author, visit

Get Headlines free  SUBSCRIPTION. Keep us publishing – DONATE


0 0 vote
Article Rating
Notify of
Oldest Most Voted
Inline Feedbacks
View all comments
Sheryl Hamlin
Sheryl Hamlin
4 years ago

Just got word today (Monday am 6/13/2016)…the city is transitioning over to a new website for hosting this data…url is here…

4 years ago

Note, as of Friday am June 10, the video from this meeting is still not posted …