Grand Terrace Declares Fiscal Emergency

(June 28)  GRAND TERRACE – The Grand Terrace City Council on Tuesday declared the city to be in a state of fiscal emergency, simultaneously readying the 12,500 residents of the city for either further municipal service reductions or the imposition of a tax to redress the city’s deteriorating financial state.
As the third smallest city in San Bernardino County population-wise, Grand Terrace is at a geographical disadvantage in that it is nestled into the unpopulated Riverside County frontier on the south, Blue Mountain to the east and is elevated on a terrace above Colton and San Bernardino to the north, such that the city is isolated and relatively uninviting to passers-by. As such, the commercial and retail base it hosts serves little more than its own limited population and the city generates less in sales tax than all of the county’s other cities. This lack of revenue was an issue for Grand Terrace even before it incorporated as a city in 1978, when the Local Agency Formation Commission staff had recommended against Grand Terrace’s formation and had to be overruled by its board members.
After incorporation, city manager Seth Armstead and his successor, Tom Schwab, sought to bring in additional retail businesses to beef up sales tax revenue but were consistently frustrated in those efforts because retailers were resistant to setting up shop in a trade area with such a limited population.  In time, the city gravitated to utilizing its redevelopment agency to shore up the city financially, utilizing it to employ city workers whose main duties had little or nothing to do with redevelopment, while the city made borrowings from the agency to finance operations on a year to year basis, and did not repay those loans.
With the departure of Schwab as city manager in 2008, city officials moved to end this reliance on the redevelopment agency. Beginning in 2009-10, the city embarked on an effort to lean out municipal operations and since that time there has been a 57 percent reduction of city staff. Then in 2011, as the city was weaning itself from its financial dependence on the redevelopment agency, state legislation shuttered redevelopment agencies throughout California.
Grand Terrace in its 2012-13 general fund budget anticipated revenues of $3,539,486 and expenditures of $3,856,167. The city fell short of its revenue expectations, and the city has sustained what is anticipated to be a $760,513 budget deficit in the current fiscal year ending this Sunday, June 30. It made up that difference by utilizing remaining reserves. In a report, city staff noted that the projected budget deficit for next year runs in the neighborhood of what the city will lose in revenue from the loss of its redevelopment agency – $737,848.
After advance publicity about the city’s pending financial doom and speculation that the city would go so far as to disincorporate and return to being a county service area, a capacity crowd came to Grand Terrace City Hall and flooded the council chambers June 25 to witness the city council’s action.
While the council did not take the drastic step of abolishing the city, it did vote to declare a fiscal emergency and to pass the 2013-14 budget, topped by a resolution calling for a citywide vote in November on a utility tax measure intended to generate $1.5 million per year. The budget anticipates $3.3 million in revenue and projects $3.98 million in expenditures, while counting upon an infusion of money by means of the tax that will balance the budget by June 30, 2014. If the tax measure does not pass, city officials said, they will move on December 1 to make draconian cuts that will ensure the budget balances.
The new budget calls for a reduction in police service. The city contracts with the San Bernardino County Sheriff’s Department for law enforcement and at present the sheriff’s department, which is also contracted to patrol neighboring Loma Linda, devotes 6.8 deputies to patrol duties in Grand Terrace. That number will drop to 5.8 after the new fiscal year commences on July 1.
The council built in conditional cuts to the budget, which will entail the closure of the city’s two largest parks, the elimination of one more deputy position and defunding the senior citizen center that will go into effect on December 1 if the utility tax measure does not pass in November.
City residents have proven resistant to taxing proposals in the past. Mayor Walt Stanckiewitz told the Sentinel it is now up to the city’s voters to decide whether the city is indeed on the brink of evaporation or crying wolf.
“As members of the city council, we have the challenge of educating the public,” Stanckiewitz said on Wednesday. “We had over 200 people in the council chambers last night and I believe they understood the situation. They had a response. Their basic message was this is their choice, whether they are willing to take on a tax to save the city. It is not the council’s decision. Our decision was to give them that choice.”
Stanckiewitz said there is some prospect the city’s residents will approve the tax. “Many of them do not like it but the predominant attitude seemed to be ‘This is still our city and if this is what we have to do to save it, then this is what we’ll do. If we have to give up a night out going to dinner and the theater, we will do that.’”
Stanckiewitz said there were various calculations as to what the cost of the tax would be per family.  “It depends on what you use as your average household size,” he said. “If you figure 2.5 per household, in a city of 12,500 population, that comes to $25 to $30 per month. We have a consulting firm working those numbers. We should have them on July 9.”
While he sought to be upbeat, Stanckiewitz gave a grim assessment of what might await the city.
“If the revenue measure does not pass in November, then we will reduce another deputy as of December 1, which will represent $150,200 in savings through the remainder of the year,” the mayor said. “We will discontinue funding the senior center, for another $13,500 savings. We will shut down our emergency operations and save $2,800. We will close Pico and Richard Rollins parks and save $60,000. We will still need to do weed abatement, so we will have to put another $6,500 back into the budget. As of January 1, we will reduce our contract for city attorney and finance department services to save $26,000. And we will engage in a further indoor work force reduction at City Hall, changing over to having our city manager and other staff present only two days a week to achieve a savings of $266,000. We would no longer have a city staff. If we have to do this, we are done as a city for all intents and purposes.”
Despite the historic significance of the council declaring the city to be at the cusp of a financial abyss Tuesday night, Stanckiewitz did not characterize what occurred as a defeat.
“We had a good meeting,” he said.  “We adopted a budget that will be balanced by June 30, 2014 with or without a tax measure. We are looking to find an additional $300,000 so we can balance our funding. We reduced the sheriff’s contract by one deputy for the full year, which will save us $257,000. We will put $10,000 back in for overtime in case we need it in view of the layoff. We succeeded in keeping a balanced budget and we declared a fiscal emergency, which gave us the ability to go out to our citizens to see if they want to support maintaining their city, so they can decide what should be done. That is as it should be.”

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