Busted
Why local governments are broke and coming after your money By Thadeus Greenson
F
ortuna Mayor Doug Strehl hates taxes. So does Humboldt County Board of Supervisors Chair Rex Bohn. Strehl’s worked on Fortuna’s Main Street since he was 15 years old and has run Strehl’s Family Shoe and Repair for more than 30 years. A Humboldt County native, Bohn worked in private industry for 50 years before joining the board. Both men’s views on government finances probably lean more Tea Party than tax-and-spend. Yet they both recently voted to put tax measures before local voters in November, just one of many signs that local governments on the North Coast are at a crossroads. Still battling the aftermath of the Great Recession, local governments have spent years tightening belts, shedding costs and tearing through savings accounts, many of them working to fend off the day when they would have to come back to the public, hat in hand. But that day is here. Four of Humboldt’s seven cities, as well as the county itself, will put tax measures before voters in November. Most say a tax bump is the only thing that will prevent large-scale service reductions, including fewer police on the street, fewer folks fixing local roads and less upkeep of public parks and facilities. “As we’ve cut over the years, every department has taken a major hit and every department needs help — they’re all bleeding,” says Strehl. “The only light at the end of this tunnel is this measure.”
Some would say that tun-
nel extends all the way back to 1978, when California voters passed Proposition 13, capping property tax rates and shifting the balance of power between state and local governments. Prior to Proposition 13, local governments largely earned their revenue through property taxes while sales tax served as the state’s revenue bell cow. In the aftermath of Proposition 13, however, local governments — especially
16 North Coast Journal • Thursday, Aug. 14, 2014 • northcoastjournal.com
cities — have become both increasingly dependent on state funds and forced to look at other revenue sources, chiefly, sales taxes. With many California cities heavily dependent on sales tax revenues to fund their services — Eureka, for example, gets almost two-thirds of its general fund revenue from sales taxes — the Great Recession hit local governments like a tsunami. When markets crashed in 2008, consumer confidence was shattered. People had less money to spend and what they did have, they increasingly saved and used to pay down debts. The result was less money trickling into local stores and restaurants and into the coffers of local government. Meanwhile, in the midst of a budget crisis of its own, the state launched a massive belt-tightening that included steeply decreased contributions to local governments. Ryan Emenaker, a professor of political science at College of the Redwoods, says because sales tax revenues filter through the state, there’s a lag time between when you buy something at the store and when the local government gets its cut. So the full impacts of the recession in 2008 weren’t felt by local governments until 2009 or 2010. Then, Emenaker said, the first reaction of most local governments is to make do with what they have, even if it means dipping into their savings. That’s what’s happened on the North Coast. In Fortuna, the city council cut spending in most departments but, not wanting to enact catastrophic cuts that would cripple services, the council also approved a staggering amount of deficit spending. The city went into 2011-2012 with a $10.5 million reserve, but will have spent that down to a projected $4.2 million at the close of this fiscal year. The Eureka City Council enacted four years of budget cuts through 2010-2011, when it approved the cutting of 12 police officer positions in the face of a structural budget deficit of $1.7