The Ceres City Council was given an overview of city revenues last week with the possibility of increasing user fees in the future.
The consensus of the council was to wait to see the budget picture that evolves for the next fiscal year, which must be adopted by June 30. The 2023-24 budget year begins on July 1.
It appears the council does not have the stomach to put forth a sales tax increase measure on the ballot given that taxes were increased in Ceres in 2007 and countywide in 2016. Measure H was passed by Ceres voters in 2007 to enact a half-cent tax on sales to bolster police and fire personnel and equipment costs. Measure L was a countywide measure approved by voters in 2016 to enact a half-cent tax to fund by road improvements and transportation projects.
The current sales tax rate in Ceres is 8.375 percent but the city’s General Fund only receives one percent of those sales tax dollars collected. Sales tax rates can only be increased by a ballot measure which would require a majority vote approval, or by a special tax measure, which would require a two-thirds’ voter approval.
The council indicated it is open to studying user fees charged to those receiving a particular public service, such as park rentals, recreation programs, report copies, plan check review, zoning review and business license fees. Before those fees can be raised, the city must perform an analysis of the city’s costs. The last fee study was conducted in 2002.
Finance Director Leticia Dias said the council may want to consider conducting a fee study to ensure that “the entire cost of providing services is being captured.”
The council also has the option to see if there needs to be an increase in development impact fees to compensate the city for the costs of providing service to new residents. Examples of public facilities that have been supported by development impact fees include streets, traffic control devices, recreation facilities and public safety facilities. The last nexus study was conducted in 2008.
The city currently has two Community Facilities Districts – formed in 2002 and 2006 – to finance public capital facilities and services. The revenues collected from the CFD tax are used to finance the purchase, construction, improvement, expansion or rehabilitation of any real or tangible property with an estimated useful life of five or more years. The maximum assessment of the CFD tax may be increased by the annual percentage increase in the CPI, not to exceed four percent, and is assessed annually on the property tax roll.
The city’s Landscape and Lighting District was formed in 1987 to fund improvements to street lighting, street trees and the landscaping on the exterior of access control fencing. The maximum assessment may be increased up to the actual cost increase or the annual percentage increase in the CPI, whichever is lower and is assessed on the property tax roll.
With two of the five councilmembers months into their service and still getting up to speed on city matters, City of Ceres Finance Director supplied the council an overview of the revenue stream.
The fiscal year 2022-23 budget totals $85 million across all funds with a General Fund balance of $27 million. The city has reserves of about $6.7 million or 24.8 percent, which exceeds the council’s established minimum reserve of 18 percent.
The largest source of city revenue comes from property and sales taxes, the Utility Users Tax and the Transient Occupancy Tax. Other revenue comes from user fees, development impact fees, Community Facility District Fees and Landscape and Lighting District fees.
The city also receives state and federal grants.
Voters would also have to approve an increase in the city utility users’ tax, which has been three percent since 1998. The tax is applied to monthly telephone, cable TV, electrical and natural gas services.
Transient Occupancy Tax is a general tax imposed on the occupants of a hotel/motel. The current TOT rate is 10%. This rate was approved by a majority vote in 2016.
The council is powerless to do anything about property taxes imposed on real property and tangible personal property. The annual tax rate is 1% of assessed value. Assessed value is capped at the 1975-76 base year value plus the change in CPI or 2%, whichever is less. The assessed value of real property is reassessed to full current value anytime there is a change in ownership.
One glaring deficiencies in funding is that of the Storm Drain Study and Master Plan which the city adopted in 1995. Since then there have been multiple project specific planning documents which address deficiencies and growth induced improvements to the storm drain system. The existing storm drain infrastructure in Ceres is comprised of several sub-systems with retention basins and storm water lift stations. Disposal of collected storm water is either by percolation or discharge to TID canals by agreement, and three locations to the Tuolumne River.
The Storm Drain Master Plan, which will be presented at a future council meeting, will evaluate the existing storm drain systems and develop a 10-year capital improvement program for implementing the Storm Drain Plan recommendations. The General Fund, unless an alternative source is identified, will bear the cost of these future projects, estimated to be $52 million.