City also hires consultant to know whether cannabis businesses can generate even more revenue for Signal Hill.
In a rare piece of good news coming out of the 2020 pandemic year, the City of Signal Hill’s audited financial report for its 2019-2020 fiscal year shows about $2 million more in tax revenue than expected, contributing to an operating-budget surplus of nearly $4 million.
Finance Director Sharon del Rosario told the Signal Hill City Council during its Jan. 12 meeting that two of the City’s largest sales-tax generators– the automotive and business industries– saw higher sales over the prior year, balancing out other sectors where revenues declined.
“Although the City’s fiscal-year 2019-20 projections anticipated a decline in most revenue sources due to the COVID-19 pandemic, the City’s exposure and actual experience proved to be better than predicted,” del Rosario said. “The largest increase overall came from sales-tax pools for online shopping, which has been a growing segment over the past several years.”
Expenses also beat projections by about $300,000, despite additional pandemic-related expenses, she said. All municipal departments except for the police came in under budget, according to the staff report. Police investigations, support services and emergency services pushed the police department over budget by about $233,000.
In addition, the City’s two main reserve funds are also well-stocked, totaling $18.7 million or 84% of the $22.4 million operating budget, well above the City’s target of 50%, del Rosario said. The council agreed to transfer $2.5 million of the nearly $4 million surplus to replenishing those reserve funds.
Insurance and pension reserves will get $750,000 of that amount since those ongoing expenses represent the City’s biggest long-term liabilities, totaling $40.6 million, del Rosario said. The City is trying to mitigate those expenses by offering multiple benefit tiers, increasing employee contributions and paying those expenses in full, she added.
The council credited the City’s conservative budgeting strategies for allowing it to come out ahead. Mayor Edward Wilson further noted that the percent of revenue sales taxes represent– about 62% of the total– is lower than it has been in the past.
“We have made an effort to try to diversify our revenue base so that we’re not as reliant on sale tax,” he said. “That’s a good sign for us as a city.”
The council also approved hiring consulting firm Harris & Associates to conduct a fiscal and economic analysis of how cannabis businesses would impact Signal Hill– should the City allow them.
The council had agreed to budget $40,000 this year for such a consultant to determine if potential sales-tax and licensing revenue from cannabis businesses would exceed expenses, including social costs like increased drug use by the city’s youth.
See related story: Wanted: Cannabis Consultant
Economic Development Manager Elise McCaleb said the City evaluated five companies who responded to its request-for-proposals and deemed Harris & Associate the best fit, though the firm’s fee is $10,000 more than the City’s budget.
The council agreed to transfer that additional $10,000 from the City’s economic-development reserve fund for contract services.
Harris & Associates will analyze the cannabis market in Signal Hill, including unmet demand, considering cannabis businesses are legal in the surrounding City of Long Beach.
The firm will project long-term fiscal impacts of each type of cannabis business, including retail sales, manufacturing, testing and indoor cultivation. It will also assess how each type of business would affect job creation and the Signal Hill community and environment.
Harris & Associates Senior Director Hitta Mosesman said her firm will use objective, non-industry data and examine comparable cities that allow cannabis businesses.
“There aren’t a lot of studies that we can look to that you would typically look at in a demand analysis,” she said, adding that the firm will especially assess indirect costs such as traffic accidents, youth effects, public-safety issues and emergency calls.
During public comment, resident Randy Harshorn expressed concern about those indirect costs, citing the example of Pueblo, Colorado where he said hospitals have been impacted by additional and costly drug-related cases since that city legalized cannabis in 2014.
The council voted 4-1 to hire the firm, with Councilmember Tina Hansen dissenting, saying she is opposed to allowing cannabis businesses in general. Other council members said the consultant’s study would allow the City to make an informed decision rather than one based on assumption or conjecture.
“Unless we’ve really analyzed the impact in all aspects and come up with a very educated decisions on this, I see it as avoiding criticism,” Councilmember Lori Woods said.
Wilson said 38 states nationwide have approved cannabis for medical or adult-recreational use and that Signal Hill residents have expressed interest, just as they would for a restaurant or auto dealership, even if such businesses already exist in Long Beach.
“That is the direction this country is going,” he said. “It is the future.”