Tahoe City PUD cuts spending before summer

A probable property tax grab by the state is causing a local utility district to enact cuts to programs and services.

The Tahoe City Public Utility District is enacting a 4 percent spending cut during this budget year and planning for an 8 percent cut in 2009, according to an agency memorandum written by district General Manager Cindy Gustafson.

During a board meeting on March 21, staff recommended and the directors approved mid-year budget cuts equaling $207,716. That money will be shaved from all departments — utilities, parks, and recreation.

The district operates under a calendar year budget cycle, causing utility officials to execute mid-year cuts while other agencies, operating on a fiscal year, July 1 to June 30, have more wiggle room to plan as the situation unfolds at the state level.

“We are going to implement these cost reductions,” said district Treasurer Jim Dykstra. “A lot of our costs are in the summer, so we have to take these measures [now].”

The utility is anticipating a move by the governor and legislature to take 8 percent of property tax revenue from local government agencies to help balance the state’s budget. The district proposed a 4 percent cut this year since it is already halfway through its budget cycle.

Ironically, the money reallocation is allowed by Proposition 1A, legislation enacted to protect local governmental agencies from state money grabs. The bill passed with overwhelming support by California voters in the 2004 general elections with support from both houses of the state legislature, and Governor Schwarzenegger.

The protection of property tax revenues has a caveat, allowing the tax revenue to be taken if the governor declares a budgetary emergency to suspend the provision.

Governor Schwarzenegger declared a fiscal emergency on January 10.

The law allows borrowing a maximum 8 percent of property tax revenues, for two years within a 10-year period. The money must be paid back with interest within three years, according to the text of the law.

Forty-nine percent of the Tahoe City utility district’s total revenue is gathered from property taxes, Dykstra said.

To increase revenue in the face of reduced tax income, staff also recommended raising the rent on a facility used by North Tahoe Arts and the North Lake Tahoe Resort Association. But the board asked staff to wait on that decision until June, Gustafson said.

The board also deferred a proposal for the engineering department to consider increasing fees for miscellaneous services, possibly boosting revenue by $45,000.

Although no interruption in water or sewer services are planned, utility staffing and operations will be affected, according to a district memorandum.

Some of the items being cut out of parks and recreation include $10,000 from the outdoor concert budget at Commons Beach and a reduction in the length of some summer recreational programs. The district will attempt to partner with other local agencies to provide the funding for the concerts, Dykstra said.

Other Tahoe agencies worried about state tax grab Around the lake other utilities are watching the financial wrangling at the capitol with great interest. “We are keeping an eye on it. We are very concerned about it,” said Larry Marple Chief Financial Officer for the North Tahoe Public Utility District. The North Shore water, sewer and parks purveyor, which operates on a fiscal year budget cycle, counts on property taxes for a third of their total revenue, he said. “I’ve put my board on alert,” Marple said. The Squaw Valley Public Service District, that oversees utilities, refuse collection and fire protection services for most of the Olympic Valley, funds 95 percent of its fire protection and 30 percent of its utilities budgets and from property taxes. Officials at the district are in the midst of proposing an unrelated utility rate increase to fund an account for the replacement of infrastructure, according to General Manger Rick Lierman. In the event of Proposition 1A borrowing, no decrease in fire services would occur, but the money potentially raised by the district’s rate increase would go toward financing the state’s debt, Lierman said. And the North Tahoe Fire Protection District is already planning for the 8 percent hit, among other possibilities, as it prepares for preliminary budget talks, Chief Duane Whitelaw said. About 60 percent of their budget comes from property taxes, not including any locally passed assessments or taxes like the 2007 Fire Suppression Services Assessment passed last fall. Whitelaw said he hopes decision makers at the state exempt public safety agencies like his from any budget reductions, especially in light of the findings just released March 19 in the California-Nevada Tahoe Basin Fire Commission’s report. The fire district is also concerned about the downturn in the real estate market, Whitelaw said. “Typically the fire district enjoys a robust property tax increase,” Whitelaw said, explaining a typical 6 to 8 percent annual gain. He said the combination of a flat housing market and a tax grab, could produce the worst case scenario. “It could have impacts on fire and ambulance delivery time,” he said. “Which means increased response time.”