● How would the City's budget be impacted if the special parcel tax does not pass?
Currently, the City's operating expenses are detailed in the graph above. Should the special parcel tax not be passed by voters during the March 7, 2017 General Municipal Election, the City Council will have to consider ways to cover the cost of fire and paramedic services.
One possible way would be to find savings by reducing the budgets of other City services. An example can be found in Fact Sheet 4: Budget and Allocations and a graph highlighting the reductions can be found below:
A higher version PDF of the charts above can be accessed here.
In addition, the City Council could also consider utilizing the City's reserves to fund fire and paramedic services.
● Could voters approve a tax to build – or rebuild – the City’s reserve?
Yes. Voters can pass a tax for any lawful purpose including funding a reserve.
● How much of the City’s reserve would be spent if the parcel tax is not extended and if there are no reductions in service level costs?
For the remaining portion of 2017, the City’s cash out-of-pocket if the parcel tax is not extended is approximately $2.3 million. And, before another ballot measure is approved and cash is received in December 2018, the City would be out-of-pocket approximately $7 million.
The cost of fire suppression and paramedic services for FY 2016-17 is $4.7 million. The City receives monthly invoices from the County for the service.
City payments to the County are made from a special fund specifically and for the single purpose of paying fire and paramedic services invoices.
The money in the special fund to pay the County invoices is received by the City twice a year, in December and in April when property owners pay their property tax bills. It works as follows: For FY 2016-17, the $4.7 million was divided among each parcel by the established formula (Spring). The tax per parcel was then provided to Los Angeles County (July/August). Los Angeles County then prepares and sends property tax bills to each property owner. The tax payment is divided into two installments with half due in December (2016) and half due in April (2017).
Revenue to pay for fire and paramedic services during FY 2016-17 are received by the City in December 2016 and April 2017. If voters do not approve extending the existing tax on March 7, 2017, property owners will not see the parcel tax on their December 2017 and April 2018 property tax bill. The cost to the City for fire and paramedic services between the start of the fiscal year on July 1, 2017 and the end of the calendar year, December 31, 2017 (six months) is approximately $2.3 million. $2.3 million represents the out-of-pocket cost to the City for the remainder of calendar year 2017 (July 2017 – December 2017)
The earliest, by State law, that a new ballot measure could potentially be before voters is April 2018. If a parcel tax is approved by voters in April 2018, the assessment would be provided to Los Angeles County in July/August 2018. The parcel tax would appear on property tax bills due December 2018 and April 2019. The cost to the City for fire and paramedic services between July 2017 and December 2018 (1.5 years) is approximately $7 million.
Without parcel tax revenue for fire and paramedic costs for FY 2017-18 and half of FY 2018-19, the out-of-pocket cost to the City is approximately $7 million ($4.7 million for one year plus $2.3 million for half a year). On the premise that a like tax measure would be put before, and approved by, voters in April 2018 for long term funding, the City Council may consider options for covering this cost for a year-and-a-half unfunded period ranging from utilizing its $9.3 million reserve and service level cost reductions. It may be that the City Council considers evaluating the use of reserves and service level cost reductions if a like tax measure is not on the ballot or approved by voters. Reference to this can be found in Fact Sheet 4 at http://www.pvestates.org/home/showdocument?id=3204.
● How much is in the City’s reserve?
The 2016-17 fiscal year (FY) budget states that the City is maintaining an operating policy reserve of $9.3 million.
● If all property owners pay 1% of the assessed value of their property as property taxes, why do some cities receive fire and paramedic services from Los Angeles County without paying separately and / or more to the County?
There are multiple components to the answer to this question.
Cities that relied on Los Angeles County for fire and paramedic services prior to Proposition 13, such as the Cities of Rancho Palos Verdes and Rolling Hills Estates, are part of the Los Angeles Consolidated Fire District and they receive service from the Los Angeles County Fire Department. Cities that had their own independent Fire Departments when voters approved Proposition 13, such as Cities of Los Angeles and Beverly Hills, are not part of the Los Angeles Consolidated Fire District and as such, are responsible for providing its residents with a Fire Department independently.
In Rancho Palos Verdes and Rolling Hills Estates, a portion of property taxes paid by property owners to the County is automatically taken by the County to fund its Fire Department.
Los Angeles City and Beverly Hills, who are not part of the Los Angeles Consolidated Fire District, do not have the County taking a portion of property taxes paid by property owners for fire and paramedic services. As such, these cities must independently fund and provide fire and paramedic services to its residents.
Independent cities such as Palos Verdes Estates, Los Angeles City and Beverly Hills, that are not in the Los Angeles Consolidated Fire District, either have their own Fire Department or contract with another agency for fire and paramedic services. Fire and paramedic services for independent cities are paid from property tax revenue and / or from any other revenue the city generates. For example, cities have a variety of taxes that may include property tax, sales tax, utility tax, business license tax, and hotel tax to provide in combination the public safety and administrative functions of the city.
Palos Verdes Estates, as an independent City, does not automatically receive fire and paramedic services from Los Angeles County nor does it have property taxes automatically taken by, and directed to, the Los Angeles Consolidated Fire District for fire and paramedic services. The City choses to contract with Los Angeles County for the service and pays them upon receiving invoices.
Palos Verdes Estates relies on property taxes as is primary revenue for funding public services. Property tax revenue is fully budgeted for the services, programs and projects currently received by residents. Voters and the City Council, to date, have utilized a special, separate parcel tax to pay the cost of fire and paramedic services. With the combination of property tax and the parcel tax, the City provides and maintains the current level of services.
The City’s parcel tax is on the March 7 ballot for voters to determine whether or not to continue the existing funding source. Without the parcel tax revenue, property taxes will be used to pay the cost of fire and paramedic services; the City Council will determine how to commensurately reduce services to maintain fire and paramedic services.
● What has been the average amount of tax increase each year? What happens when the City collects more funds than actual charges?
The average amount of tax increases to the special parcel tax is 3.4% per year (Median-Sized Home Rates Spreadsheet). The City collects only as much as necessary to recover the LACoFD’s charges to the City. When the City collects more than the County’s charges, the funds are credited to the following year’s charges (Fire Contract Cost History).
● What is the purpose of the 6.2% cap in the ballot measure?
● Why does PVE have a separate tax? How has it escalated compared to RPV?
Rancho Palos Verdes was being taxed to pay for fire protection services by the Fire District when Proposition 13 passed in the late 70’s. As a result, the Fire District received a share of the 1% property tax in RPV, tying the Fire District’s future revenues in RPV to its assessed values. Assessed values, and therefore revenues, have increased by 52% in RPV from 2005 to 2015. Properties in RPV also pay a special tax of $65.08 per home, with other rates for various types of properties, approved by voters in 1997.
The Fire District was not levying a tax in Palos Verdes Estates when Proposition 13 passed. As a result, PVE is responsible for funding fire protection services, either from its general fund or from special revenues such as the proposed tax measure. PVE’s fire protection services costs have increased by 41% from 2005 to 2015. If PVE’s costs had increased at the same rate of PVE’s assessed value increase, which was similar to RPV’s, the cost today would be $4,901,868 instead of $4,552,384.
Source: LACoFD Planning Division Chief, January 2017