City Council Uses Cuts, Taxes to Balance Budget

The San Diego City Council, during a marathon session Thursday, balanced a $470-million general fund budget for the upcoming fiscal year by adopting a string of still-undefined budget cuts and increasing numerous taxes and fees, many of which will be borne by the city’s business community.

Council members also reversed field and, after lengthy and often bitter discussion, restored funding to four organizations that promote the city as a tourist and business destination.

While the council approved a $1.2-billion total budget for the fiscal year that begins Sunday, all but a few seconds of the seven-hour meeting was dedicated to covering a $38-million shortfall in the $470-million general fund. It is the general fund that provides for many municipal services, such as public safety, parks and libraries.

During a rapid-fire string of votes, the council approved a series of tax and fee increases aimed at reducing the shortfall. But, when the string of new revenue sources ended, the council directed city department heads to trim about $10 million from their already-lean budgets.

It was uncertain Thursday night which city services would be trimmed back. But City Manager John Lockwood told council members that the cuts “will have a negative impact.”

The Police Department, for example, will have to cut about $3 million from its $145-million budget, but Lockwood was unsure exactly what services would suffer.

Similarly, the city attorney’s office will have to cut an unspecified amount from its $16-million budget, but it was uncertain Thursday which programs would be cut.

“We don’t know what will be missing,” Councilman Ron Roberts complained just seconds before the council voted to approve the $470-million general fund budget.

In addition to increased taxes and fees and the citywide budget cuts, the council also trimmed millions from the shortfall by delaying capital improvement projects slated for Balboa Park and Mission Bay. The council also agreed to eliminate $4 million needed to buy land for a police substation in District 4.

Most of the fees and taxes approved Thursday will raise the cost of doing business in San Diego.

For example, the council voted 5 to 4 to increase the business license fee from $30 to $125, which would raise $3.2 million in new revenue. Council members Abbe Wolfsheimer, Wes Pratt, Linda Bernhardt, Filner and Mayor Maureen O’Connor voted for the increased fee. Council members Ron Roberts, John Hartley, Bruce Henderson and Judy McCarty voted against it.

The council also increased the current $4-per-employee business fee to $5, creating $875,000 in new revenue.

In another business-related tax, the council increased the rental unit fee paid by residential landlords. The charge is now $30 per business plus $2 per unit for landlords who own six or more units. The new fee, which will apply to owners of one or more rental units, will raise $2.3 million through a $40 flat rate and a $3-a-unit fee.

The council also approved a $2-million hike in fees for various city services.

The council further voted to use a minimum of $4.8 million from the Water Utilities Department to pay for the city’s ongoing legal fight to keep Southern California Edison from taking over San Diego Gas & Electric. The council had been funding the legal battle solely through the general fund.

Tourists and San Diegans who go out for a night on the town will also see increased costs because of the council votes.

By a unanimous vote, the council approved a 3% rental car fee that will raise an estimated $3 million. The tax is similar to one that the city eliminated in the 1970s.

The council also approved a tax that would be levied on what Lockwood described as “special events . . . at which police primarily . . . but also other divisions . . . would be required to support the event.” The new fee would raise an estimated $250,000.

Council members directed the city manager to study whether the city can levy a tax on the San Diego Sports Arena for police and other services provided during rock concerts and other events. They also agreed to study an entertainment tax that would levy a fee on motion picture tickets.

The council narrowly defeated a proposal to raise $11.2 million through a 2% utility user tax against business, commercial and residential customers of gas, electric, telephone and cable companies.

City staff members at Thursday’s meeting advised council members that it will take weeks to determine exactly how much money the tax and fee increases will generate. In addition, City Atty. John Witt advised the council that his office must first determine if all of the new and increased fees and taxes are legal.

The most heated arguments came when the council debated whether to reverse field and fund the four agencies that attempt to draw tourists and businesses to San Diego.

The council froze funding at current levels for the San Diego Convention & Visitors Bureau, the San Diego Economic Development Corp., the San Diego Motion Picture and Television Bureau and the Greater San Diego Chamber of Commerce’s Economic Research Bureau.

Filner, who voted against the funding, told officials of the four organizations that the council’s vote signaled the need for “greater accountability. . . . It’s a shaky vote.” Bernhardt, who switched her vote and agreed to fund the organizations, urged the organizations to add women and minorities to their boards of directors.

ConVis, which will receive $6.4 million instead of the $5 million that council agreed to provide earlier in the month, “won’t have to resort to all of the dire activities that we were afraid we would have to do,” ConVis executive Dal Watkins said Thursday. The vote “shows that tourism does have an awful lot of support in this city,” Watkins said.

Watkins applauded Councilman Hartley for fashioning the compromise funding package that was approved by a 6-3 vote. Hartley’s proposal, which was incorporated in a lengthy motion, calls for the various organizations to reduce their city funding requests by 50% during the next five years.

EDC President Dan Pegg said his organization is “open to an audit” by the city if that would eliminate council’s concerns. “We have no problem with greater accountability,” said Pegg, who added that his organization would be able to maintain its programs, given the $456,750 in funding approved by the council.

The council also agreed to provide $362,250 for the San Diego Motion Picture and Television Bureau and $52,500 for the chamber’s Economic Research Bureau.