For months, the leaders of the San Mateo County have expressed concern about the possible loss of a key source of revenue, saying the situation may threaten vital safety net services, so, with no resolution in sight midway through the 2023-24 fiscal year, the executive County Commissioner Mike Callagy recommended that the Board of Supervisors hold a special study session on a looming issue that could also affect future spending plans.
"We're $69 million short," Callagy said during the regular Board of Supervisors meeting scheduled for next Tuesday. ?This is something we are working on with our (state) legislators. That would be a huge blow to this county, and it only grows every year.
The potential shortfall is fueled by potential cuts to what are known as vehicle licensing-in-lieu fees, or VLFs, a form of property tax on motor vehicle ownership.
Under a long-established agreement, cities and counties receive additional property taxes from the state to replace revenues that were cut under a two-decade-old budget agreement.
The latest state budget proposal released by the governor's office in January does not include full funding of the VLF. This could also pose a threat to the budgets of local cities that also receive that type of revenue.
“This will impact public safety and the direct services that cities and county provide to our neediest population if not funded by the state,” Callagy said. "And we certainly believe that the State owes it to us."
Local governments in San Mateo County would face losing more than $114 million before the fiscal year ends on June 30, 2024.
Supervisors expressed concern for the area's most vulnerable residents.
“Our continued focus must be on expanding opportunities for all, and this starts with ensuring we have a robust array of programs and services to meet the needs of individuals and families,” noted Warren Slocum, Chairman of the Board of Supervisors.
?Our residents want to make ends meet, put food on the table, pay for college, save for retirement. “It is our job as elected officials,” Slocum added, “to work with our partners in the state to ensure we can continue to fund vital services that help all of our residents achieve their goals.”
A special study session is expected to be scheduled shortly.
News of the VLF's projected deficit comes amid a series of growing financial concerns.
At the February 14 Board meeting, Callagy and Chief Financial Officer Robert Manchia presented the Fiscal Year 2023-24 Mid-Year Budget Update, a snapshot of the economic and demographic trends driving both the need for services and the income available to pay them.
With the end of the COVID-19 public health emergency, the county has shifted "its focus from pandemic response and recovery to long-term strategic planning," according to the report.
The document also describes ?opposite trajectories? for key economic indicators. It states that overall unemployment remains low, while the cost of goods and services is increasing for everyone, while median household income is moving in different directions for certain demographic groups.
However, median household income has decreased for Black or African American households (10.2 percent from 2021 to 2022). There are significant disparities between the median income of Native Hawaiian and Pacific Islander households and certain other demographic groups (41.8 percent of Asian household income, for example).
Notably, the rising cost of living 3.4 percent increase in consumer prices from December 2022 to December 2023, and obstacles to finding affordable housing pose challenges for many.
A search for a one-bedroom apartment shows current rents over $2,800 in both Redwood City and San Mateo. Therefore, an income of approximately $100,000 a year is needed to afford such an apartment, according to a ?30 percent rule? commonly used, according to which people should not spend more than 30 percent of their gross income on rent.
The report states that ?Demographic trends indicate an aging population on relatively fixed incomes and struggling to keep pace with rising costs. If this trend persists, there may be greater demand for County services to address these evolving needs.
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