-April 2,2022-
A funny thing happened to Visalia on the way to the recession. Predictions of her demise turned out to be greatly exaggerated. Despite the economic shutdown due to pandemic and forecasts by Visalia Finance officials of doom and gloom, our fast growing city saw a 14% increase in sales tax income in fiscal year 2020/2021, a substantial 6% increase in property tax income and an unexpected 22% increase in bed tax revenue!
Adding it up, the City saw an extra $7.6 million in General Fund income than had been anticipated, the City Council learned in mid January.”We were pleasantly surprised, says Mayor Steve Nelsen, still vowing to use conservative principals as the city adopts a new 22/23 budget in coming weeks.
In a report to council in June 2020 city Finance Director Renee Nagel sang a much different tune, predicting a 9% ($2.7 million) decrease in sales tax in 20/21.Also the City’s property tax revenue was projected to increase just 1% each year (20/21 and 21/22). As for the bed tax – Nagel, based on expected low hotel occupancy – predicted only a 1% growth in each of the next two years. The report appeared to be a sobering wake-up call that leaders should prepare for belt tightening.”At the time of this writing, a majority of businesses are closed or operating at a limited capacity, and the unemployment rate has reached levels not seen since the Great Depression ”Nagel wrote.
But instead, annual bed tax revenue as of July of last year went up 22% Instead of a projected 9% reduction in sales tax- the receipts went up 14% and property tax did not go up 1% – it shot higher by 6%.
The 2020 budget estimated the city sales tax would be $30.0 million in FY 2020/21. Instead it’s $9 million more.
Now we are nearing the finish line for this fiscal year – in June (21/22) – and from all reports the boom times are continuing despite Covid’s long shadow. It might be reasonable to assume this present fiscal year with just a couple of months to go- will report similar “good times.”
Whether its retail sales, new single-family home numbers, a surge in new multi-family projects or the millions of square feet being built right now and a half dozen more giant warehouses pending in the industrial park -it seems clear we are still firing on all cylinders.The Feb 2022 EDD jobs report shows more than 10,000 additional jobs in the county compared to a year ago. Also the labor force here has increased by 7000 as both supply and demand for jobs has climbed. Like or not – we are on the grow.
One unappreciated fact is that some of the new industrial distributors are contributing to our sales tax take under a law where the city gets revenue based on where a product is shipped from.(pictured: Ace Hardware rising)
In the end, the Finance Dept in 2020 was operating in a very uncertain economy with plenty of bad news on the doorstep and was forced to make a guess about the next year. But they were way too pessimistic, still through no fault of their own. Here’s how they put it.
“We will apologize in advance, because we have to assume that many of our predictions and estimates will be less than accurate, and we ask for your patience and understanding as we navigate through uncharted waters.”
So what does the Visalia Finance Department say now?
Growth statistics
In the January 2022 report they said “We can only surmise that the record breaking stimulus packages issued by the Federal and State government combined with the gradual reopening in the early part of 2021 from the historic lockdowns, contributed to this growth.”
In the latest report the department says” The main areas of the growth in Sales Tax for Visalia were in General Retail (department stores, apparel stores) which grew$1.5 million; Business to Business (office equipment, industry) which grew $1.4 million; andTransportation (auto sales, service stations) which grew $.8 million. Property Tax maintained its growth
trend increasing 6% as existing home sales, new development, and property values increased in Visalia.
The ending of the shelter in place and reopening of things in California really was evident in Transient Occupancy Tax (TOT) revenue as fiscal year 2020-21 had an increase of 22% as compared to last year.”
Instead of shrinking, the business community expanded.Visalia has 12,505 licensed businesses operating in the City, an increase of 190 as compared to last year, the report adds.
“Construction activity in the City increased 13% (based on the number of all permits issued) in fiscal year 2020-21. The total valuation for all permits issued was $473 million, a 39% increase from the prior year. The City added 1.9 million square feet of new commercial property and 3.6 million square feet of space overall.
In terms of single-family dwelling permits, fiscal year 2020-21 had an increase in construction activity compared to the prior year. The new single-family dwelling permits issued were up from the prior year by 36%. The construction value for 749 new single-family dwelling permits came in at $197 million, which was up 40% from the prior year valuation level.”
It was the eighth consecutive year that the General Fund has ended the year with a surplus.
Not included in this surplus was The American Rescue Plan federal grant funding- a total of $29.3 million earmarked for Visalia. The Act states that funding can be used to:
▪ Respond to COVID-19 or its economic impacts
▪ Replace City revenues lost due to COVID-19
▪ Provide premium pay to eligible essential workers
▪Invest in water, sewer, storm water, and broadband infrastructure
All this saves the City money it would otherwise have to spend from local sources. Then there are Emergency Reserves at 25% of operating expenditures with a balance of $16.4 million .Beside these monies Visalia received Coronavirus Relief Funds (CARES Act) of $1.7 million which helped offset expenses and contributed to the General Fund surplus. The large surplus is also due to vacancies throughout the City, especially in Public Safety, where a large number of vacancies for fiscal year 2020-21 were actively being recruited for.
The unexpected surplus has helped move along at least one pending project- the Civic Center on Oak near Burke. As a result of the surplus this past year, $12.2 million was transferred to the Civic Center Reserve Fund as per the current Council Policy on surpluses. The current General Fund emergency reserves replenishment policy states that any revenues in excess of actual expenditures would continue to be deposited in the emergency reserve to maintain the reserve at 25% of operating expenditures and then all remaining surplus is to be deposited into the Civic Center Reserve Fund. So this year-21/22- more will likely be added. Council has settled on building a police building and council chamber building.
The other capital project that may now be seen in a more positive light is retiring council member Greg Collins’ plan to build a new 50meter aquatic center with kids pool near the Children’s Museum.That’s next to where a grant-funded children’s park will be built near Oak and Burke – also adjacent the Civic Center.
Collins recently made a presentation only days ago to a joint meeting of the council, VUSD trustees and the COS board to work together to help maintain the pools.Collins said the large pool could host swim meets, water polo events, senior aquatic exercise classes and kids swim lessons as well as free time swimming. All Visalia pools are at schools – limiting public access.”When I was growing up here, the COS pool was open to the public, Collins noted in his presentation. ” But not any more.”
Being in a low income area, the proposed aquatic center would likely garner grant funding. But Collins, who has been laboring to get the project off the ground for years, has yet to convince his fellow city council members to support any move forward. The facility is expected to cost $10 million. CalWater has agreed to fund $500,000 for its maintenance. In the past, a majority of council have suggested there wasn’t the money to build the complex despite big support from the city Parks and Recreation Committee and the public. Given the surplus – could it happen now?
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