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84% of cost to run City of Lathrop not being paid by residents

In 2012, the City of Lathrop was facing a 10-year budget deficit of more than $18 million.

And in just more than five years, the city has turned that around and built up nearly $8 million in reserves that will ensure that even as revenue declines over the course of the next decade, the city will remain financially solvent.

But that doesn’t mean that the city is going to sit idly by and watch their reserves dwindle.

In a presentation to the Lathrop City Council Monday night, Finance Director Cari James outlined where Lathrop is currently generating its revenue, how much of the money that is collected for local taxes ends up in local coffers, and what the challenges will be in making sure that the city remains on a steady financial track moving forward over the course of the next decade.

Interestingly enough, less than half of the city’s general fund sales tax actually comes from residents who reside within the city limits.

According to the presentation, roughly 61 percent of the city’s sales tax revenue comes from the trio of autos and transportation (15 percent or $489,294), building, industry and construction (22 percent or $751,330) and fuel and service stations (24 percent or $825,936.)

When Measure C – the one-cent sales tax increase approved by voters in 2012 to help augment existing city services and public safety – is broken down the same way, the percentage of funding from non-residents balloons to roughly 84 percent.

Despite the city’s recent successes in stretching every dollar as far as they possibly can – something that was made possible by trimming the city’s workforce from 135 down to 80 as a response to the economic downturn that hit Lathrop harder than most cities – there are still challenges that will need to be addressed in order to ensure long-term economic viability.

For one, the city’s narrow tax base – only a few businesses generate the majority of the city’s property tax and sales tax revenues – will eventually become an issue, as will the low percentage of property tax income on new housing developments thanks to funding splits with other agencies that were agreed to during the annexation phase that made the new development possible.

More emphasis is now being placed on sales tax – with Measure C accounting for $1.5 million worth of annual police costs that would need to be backfilled by the general fund were it not for the sales tax increase – and a growing unfunded actuarial liability with CalPERS is creating a growing annual cost that the city will have to manage.

And then there’s the issue with the rising cost of providing police services – something that will only become more expensive as the city grows and they continue to rely on outside agencies to provide the level of response to which residents have grown accustomed.

That’s not to say, however, that the city hasn’t taken active steps to address those and other key issues as a way of preventing the fiscal issues from becoming even worse.

Over the last five years the city has taken steps to maintain a general fund reserve that falls within the council’s policy range of between 10 and 50 percent of operating expenditures. The city also reworked its benefit liability with both of its bargaining units, and continued to update the 10-year general plan model when new information became available.

Moving forward, the city plans on continuing the positive trends by finding ways to diversify revenue sources while at the same time providing fiscal sustainability while keeping costs low for residents.

Keeping the current course, says Lathrop City Manager Steve Salvatore, while at the same time looking for new ways to remain financially stable, is what the city plans on committing to.

“We could assess people to death – we could put heavy, heavy taxes on everybody to pay for the things that we want and need,” Salvatore said. “Or we could find another way – we could bring in more retail sales tax.

“I think that’s what people would want to see us doing.”

To contact reporter Jason Campbell email or call 209.249.3544.