Tax windfall

By now, it’s a well-known fact that the city of Chico’s population spiked more than 20 percent after the Camp Fire. That put extra stress on local roads and other infrastructure, but it also contributed to another increase for the city: surplus revenue.

City Manager Mark Orme told the CN&R the city received $8 million more than was anticipated in the 2018-19 fiscal year, which ended in June. It’s attributed to three things: city department savings and an increase in sales and transient occupancy tax (TOT) revenues in the wake of the Camp Fire.

That surplus ultimately could end up being higher, Mayor Randall Stone added, due to property tax revenue, which hasn’t yet been calculated.

In upcoming 2020-21 budget talks, the City Council will decide how that infusion gets allocated. One of the caveats may be city staff’s prediction that the increase is temporary.

“Obviously the recovery is taking a different form now,” Orme said by phone. That initial wave of “everybody that could possibly be here was here”—such as the Federal Emergency Management Agency and the California Governor’s Office of Emergency Services workers—is over.

However, he anticipates being able to direct money to some aspects of the city that have taken a hit since the fire. For example, he plans to recommend funds be directed toward city street improvements. He’ll make his formal recommendations after the city kicks off its series of budget meetings in March.

The city also had an outstanding fund balance of $12 million after the 2018-19 fiscal year—but that money is largely spoken for, Orme said, and will be directed toward city reserves and other pre-approved capital projects. When combined with the $8 million surplus, that accounts for the city’s total general fund balance of $20 million.

This isn’t the only cash infusion the city has seen post-Camp Fire. It also received $3 million in disaster relief funds from the state in September. The following month, the council voted to direct most of it to public safety, including a $1.5 million communication infrastructure upgrade. About $825,000 was directed toward road repairs (see “Bearing the cost,” Newslines, Oct. 3).

What Orme said about that one-time allocation from the state is also true of the spike in sales tax and TOT funding: This unexpected revenue bump is nowhere near what the city needs to address the long-term impacts of the Camp Fire. He estimated Chico needed $290 million for city infrastructure alone (that also takes into account deferred maintenance).

Oroville, which also grew by more than 20 percent post-Camp Fire, received a similar windfall from the state—to the tune of $2 million—and unanticipated surplus revenue of $3.4 million. Of that, $1.4 million was from a 1 cent sales tax implemented last April. Chico will have a similar measure on the November 2020 ballot.

In December, the Oroville City Council chose to direct most of its surplus to general fund reserves and a pension fund.

As for how the city of Chico might spend the additional dollars, Stone told the CN&R that it would be unwise to utilize one-time funds for new staff positions because of the ongoing cost. But the surplus does present the city with an opportunity to address fire impacts via reorganization. The council recently approved such a restructuring for the police department, for example, adding a second deputy chief and dissolving two other positions. Police Chief Mike O’Brien argued that the shift was “critical” post-Camp Fire in order to manage the department more efficiently.

“It’s one-time money and should be going to address the costs that we’re going to have down the road that continue to linger from the Camp Fire recovery. So that’s our focus and continues to be,” Stone said.