TLDR: There is no magic gain of resources. No free lunch.
When discussing Measure 15-214, there is one thing about which everyone agrees: it will not create any new taxes by itself. But it WILL create more pressure on the city’s general fund, which will in turn lead to higher fees (taxes) for the taxpayers. This is diametrically opposed to the claims of APRC. To understand how this will happen, we need to follow the money.
15-214 will assign 98% of the Food and Beverage Tax (FBT) revenue to the parks department to be used for any purpose, operations or capital improvements, without restriction, for seventeen more years until 2040. Under the current ordinance, 25% of FBT is allocated to APR and 73% is allocated to the streets fund. If that 73% is allocated instead to APR, where will the streets fund make up the difference?
A key fact to remember is that the budget is a zero sum mechanism. Revenues must exactly equal expenses, by law. If there is no change in revenue, any change in expenses must be offset. So if the city gives $1M more to one department, it must take $1M from other departments. There is no way around that. It is the law. The only way to “give” and not “take” is to raise the total available, i.e., increase revenue.
The answer provided by proponents is that the shortfall will be funded by franchise fees. What they neglect to mention is that the franchise fees do not come close to replacing the lost revenue for the streets fund. Thus, the shortfall will need to be replaced by either an increase in the street user fees, or by borrowing. They also do not mention that the franchise fees are ultimately paid by you, the taxpayers.
The street user fee is, by any other name, a tax. Assuming additional debt to finance street projects will necessarily obligate the taxpayers to pay increased borrowing costs. Remember, when you borrow money, you pay back the principal PLUS interest.
The outcome of reassigning the FBT to APR is an unavoidable increase in costs to the taxpayers.
Follow the Money
Let’s assume the measure passes and analyze what happens. The FBT is variable, but let’s also assume that the FBT yields $3M annually. We remove the 73% (about $2.2M) that should go to streets, and assign it to APR. That leaves $2.2M more in the city general fund. But it also leaves a hole in the streets fund of $2.2M. Where will that come from? We are told that will come from franchise fees (more on them later). But the franchise fees only amount to about half of the lost FBT revenue. Where will that lost $1.1M come from? Increased user fees or increased debt.
This is spelled out with real numbers in the current biennial budget on p.64. When reading the budget document, keep in mind that 2021-22 (FY 22) was the first year that FBT was not used to pay off the wastewater treatment plant debt. The numbers for previous years do not apply to the current scenario, so do not be confused by them.
For FY 22 in the street fund, the budget shows $1.4M FBT revenue plus $58,500 franchise fees for a total of $1,458,500.
For FY 23 in the street fund, the budget shows ZERO FBT revenue plus $679,399 franchise fees for a total of $679,399.
The net loss to the street fund is $779,101.
(While you’re at it, take a look at the “debt revenue”, i.e., borrowing in the street fund budget: $3,814,000 in FY22 and $2,594,000 in FY23. We have two huge streets projects scheduled for the coming biennium, as well as routine maintenance.)
How will that loss to the street fund be made up? Either increased fees or borrowing or otherwise sourced from the general fund.
But what about the $679,399 franchise fees? They were previously allocated to the general fund. That money will no longer flow into the general fund.
Therefore, and not surprisingly, the total combined loss to the street fund and the general fund is $1,458,500, the same amount that the supporters would have you believe would magically be available to the general fund. It’s simply untrue.
There is no “relief” for the general fund. No money is “freed up”. It’s just moved around—reallocated to APR. That’s the big lie.
The Shell Game
You may be wondering “what are those franchise fees?” They are fees charged by the city to any enterprise that uses the city facilities. That includes commercial operations like Comcast, but it also includes the water fund, the wastewater fund, the electric fund, the stormwater fund, and the telecommunications fund. Those city departments are funded by the users. Who are those users? The taxpayers. So when the city imposes a franchise fee on those enterprise funds, they are all passed on to you, the taxpayers.
It’s just another way for the city to raise revenue “indirectly” without the taxpayers realizing that they are paying those additional fees.
So when the city takes the franchise fees from the general fund and allocates them to the street fund (or any other special fund), there is less money in the general fund to pay for the other essential services that derive from the general fund: police and fire.
There is only so much money for the city to spend. Where should it be spent?
The Bottom Line
APRC and the supporters of 15-214 are not telling the taxpayers the truth about the effect of the measure.
It will NOT “free up” any money in the general fund—there is no net change. But it will put additional stress on the street fund, and thus the taxpayers. And it will allocate the full proceeds of the FBT to APRC for an additional 17 years—until 2040. If the FBT remains stable at about $3M per year, that will be at least $50M that will have been preassigned to APRC, out of reach of the discretion of the city council and the budgeting process.
Is that any way to run our municipal government? Of course not.