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Council candidates discuss fiscal challenges

(This is the third in a series examining the candidates for Petaluma City Council. This week the candidates answer questions about the city's fiscal challenges.)

With an emergency reserve fund that leaves little room for error, city staffing reduced to a minimum, and a backlog of maintenance and outdated infrastructure, the city's bleak financial situation will present a challenge for those elected this fall.

Petaluma's current City Council passed a $32.5 million budget in June that cut every department by about 5 percent from last year. The city has reduced its general fund spending by about one third since 2008, when it was about $48 million.

Sales tax revenues are beginning a slow upward climb in Petaluma and around the state. But with revenue from the new Target shopping center not expected to flow into the city coffers until the 2013-14 fiscal year, and the need for road repair, street light maintenance and restoring public safety positions increasingly urgent, the six candidates for Petaluma's three open council seats acknowledged they will have some tough choices ahead of them, but differed on solutions.

Most candidates agreed, however, that there was little room left for cost cutting and that the city should focus instead on bringing in more revenues.

Vice Mayor Tiffany Ren? said that Petaluma's problem, at this point, was a revenue one, arguing that Petaluma was already facing a backlog of important infrastructure and maintenance projects. "Reducing costs has been addressed to the detriment of our infrastructure and social safety net," she said.

"Our city departments have cut down their budgets to austere conditions," agreed Councilmember Gabe Kearney.

"I'm not sure Petaluma has the ability to further reduce costs," Former Planning Commissioner Kathy Miller said. She added, "the current budget is pretty lean and I don't anticipate having to cut it further because we should start seeing additional money to work with once Friedman's and Target open," which was a sentiment that Councilmember Mike Healy echoed.

Healy described the current budget as "a survival budget, with expenditures in several areas reduced to levels that are harmful to service levels or otherwise unsustainable."

Employee pension costs are rapidly rising, and have become a key issue in other city council races, such as the one in Healdsburg, but no Petaluma council candidate said they would prioritize pension reform. Most referenced the city's recent negotiation of a "two tier" pension system, where new hires receive a less generous pension package, as a good first step and said they would look to other cities and the state to set a precedent for additional pension reform. Businessman Jason Davies said he was looking forward to seeing if the governor's pension reform legislation would open up opportunities for more "sustainability and fiscal responsibility" in Petaluma.

Kearney said he was supportive of the changes in Gov. Jerry Brown's recently passed pension reform legislation but added, "There is not much more I would be supportive of doing. Drastic changes to our benefits, salary and pension would negatively affect the ability of our departments to recruit staff."

Miller described pension reform as a statewide problem. "Truly effective pension reform will be very complicated and require the state, counties and cities to work collaboratively to solve the problem," she said.

Healy expressed a similar sentiment: "What happens in Sacramento and in neighboring cities will strongly influence what happens here next," he said.

Ren? also spoke of the need for a regional solution, adding, "it is important to have our employees work with us on this issue so that we can continue providing quality public services to our residents and businesses while maintaining our social contracts for a respectable quality of life for our public servants."

Planning Commissioner Alicia Kae Herries spoke of the importance of "transparent pension reform discussions."

When it came to the other side of the coin — bringing in more money to fill the city's coffers — every candidate spoke of the importance of retaining current business and recruiting others, also putting an emphasis on preserving the economic development manager position in the city. They differed on what kind of businesses the city should attract.

Herries said the city must focus on attracting tourists who will spend money in town and bringing in companies that offer stable, high-paying jobs, such as healthcare and high-tech.

"Petaluma is authentic, charming and river-oriented with award winning restaurants and independent shops," she said. "We need to further capitalize on what makes our community unique by building infrastructure to support necessary hotels and tourism."

Davies said that he would support new, high-end car dealers coming to town and, like Herries, put an emphasis on recruiting businesses, such as technology companies, that offer high-paying jobs.

"I have much experience in business outreach and development that would be helpful in this regard," he said, adding that he has already started creating "testimonials" to attract more business to town. Davies also said that the city should look at ways to generate money from its wastewater treatment plant by selling its "tertiary" water for agriculture and other non-drinking purposes.

Ren? said that the city needed to look beyond retail to attract businesses that provide high quality jobs that bring people to town and would, in turn, spur the economy.

Ren? also focused on tourism, calling it "an area where we can see real revenue growth by opening new hotels."

In addition to bringing in new hotels, Ren? said, Petaluma can increase tourism by promoting Petaluma's farmers and food makers, portraying Petaluma as a "gateway to wine and cheese country."

Miller and Healy referenced the Friedman's and Target shopping centers bringing additional money to the city — about $2 million in sales tax revenues is expected annually from the two projects once they are up and running.

Healy described the expected revenue from the Target and Friedman's centers as "helpful," but "not enough to solve all of our fiscal problems." He said that he did not expect any more proposals for "big box" developments in Petaluma, but hoped that a hotel proposed near the Petaluma river would be approved.

Kearney supported sticking to the city's economic strategic plan and bringing "diverse" businesses into the community, including more hotels. He also spoke of the need for a larger conference center in Petaluma and said he would like to see such a facility at the fairgrounds.

A tax increase is another option that has the potential to bring in a significant amount of money for the city. A half cent sales tax that was briefly considered this summer could generate roughly $5 million annually.

Ren? first proposed that the city consider a tax increase, citing a long list of "deferred maintenance" problems. The council considered but ultimately decided not to go forward with such a tax measure, due to uncertainty over public support and a desire not to compete with the Petaluma Friends of Recreation parcel tax, Measure X.

She said the city may need to consider two different taxes. The first would be a longer-term utility tax to fund stormwater maintenance or flood control. The city needs about $500,000 annually to fund its stormwater maintenance because it agreed this year to stop funding the work with wastewater utility money. That was after a former city councilmember challenged the legality of paying for stormwater maintenance from that fund. So far, the city has not identified a permanent way to pay for the work. The second would be a temporary sales tax increase to fund roads and public facilities, Ren? said.

Healy said he supported putting a temporary sales tax increase to voters as well. Such a tax, he said, would "significantly improve service levels in a range of areas." He added that he'd like to see about half the revenues from a tax increase go to street maintenance, with the rest funding a variety of items, including restoring police officer positions, replacing fire department vehicles, and maintaining street lights.

Herries said she would consider an increase in the city's Transient Occupancy Tax, also known as the hotel tax, as it would have the least impact on residents.

Miller was active in placing Measure X, a parks improvement initiative, on the ballot this fall. She said that the tax, if passed, would not only address many of Petaluma's long-standing parks issues, but also generate sales tax for the city by attracting traveling sports teams to town who would spend money on restaurants and other items.

While she was somewhat reluctant to do so in the bad economy, Miller said she might support a small, temporary sales tax increase, "as long as the money was used for things like road maintenance, park maintenance and restoring police officers in our schools."

Davies said that while he's not opposed to the idea of a tax, the city would need to do its homework before putting a measure on the ballot.

Kearney likewise said that he would want to see the city conduct polling on what sort of tax voters would support before placing a measure on the ballot. He added, "we can't do a tax without the support of the unions."

(Candidates' comments in this story were taken in part from a questionnaire they completed for the Argus-Courier. To see their full answers to the questionnaires, visit www.petaluma360.com <http://www.petaluma360.com)

(Contact Jamie Hansen at jamie.hansen@argus courier.com.)