Consultation has concluded. 

• What is a "Structural Deficit" and why does it matter?

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  "If government spending exceeds tax revenue even when the economy is strong, the deficit is deemed “structural.” Unlike cyclical deficits, structural deficits reflect a chronic problem that must be addressed through tax and spending policy changes.  With structural deficits, one-time spending cuts or temporary tax increases may help relieve the pressure but cannot solve the problem." ~ paraphrased from a guide published by the Concord Coalition. The 12-minute College Guide 

  
  

  The 7-minute Layperson's Guide

  
  

  Four years ago, the CSD Board of Directors began addressing the structural deficiencies within the CSD. They started with the most severe shortages, the enterprise (utility) funds. Each of the utilities was nearing insolvency.

  • Water - 11 years since the last rate increase
  • Sewer - 12 years since last rate increase
  • Solid Waste - 14 years since the last rate increase

  In the last three years, rate studies were conducted, increased rates were proposed and implemented, and the funds have stabilized. The Board is now looking at the District's Special Revenue Funds. These funds include:

  Roads Assessment -– 26 years with no increase. $340 per parcel, unchanged since set in 1996

  Police Special Tax -– 26 years with no increase. $80 per parcel, unchanged since set in 1996

  Gate Special Tax -– 16 years with no increase. $75 per parcel, unchanged since set in 2006

  
  

  
  

  As part of this process, the Board is now exploring presenting ballot initiatives to voters for increases to the Police and Gate Special Taxes during the 2022 election cycle.

  Because our water mains run beneath the roads, the Roads Assessment will be examined after analyzing and prioritizing the underlying water system and developing a plan to address them.

• What is a Special Tax?

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  A California Special Tax is a flat tax on parcels of real property collected as part of a property tax bill. Unlike property taxes, Special taxes cannot be based on property value and must be used for a specific purpose. As a result, special taxes link residents' public services and how governments fund those services. This link promotes realistic expectations about the public services a government can provide based on what residents are willing to pay for.

  Why does California have Special Taxes?

  Before 1978, local governments could adjust property taxes to increase their revenues. That ended in 1978 with Proposition 13, which replaced locally determined property tax rates with a statewide rate. Now, counties levy the 1% property tax rate and allocate the revenue among local governments according to a formula devised by the state legislature. For example. Bear Valley receives 1/5 of your 1% property tax.
  
  Because the State's decades-old formula for allocating property tax revenues is not aligned with the specific public services that communities demand, and because of Governor Jerry Brown's initiative to transfer authority from the state government to local governments, a side effect of this proposition has been a constraint on local government finances.

  With additional responsibilities, local public sectors also require adequate revenues. For Special Districts and School Districts in particular, because they lack the multiple sources of discretionary tax revenue available to cities, the parcel tax is the only way to generate revenue to provide for specific purposes. Because of this, many local governments and Special Districts have turned to parcel taxes to provide residents with the services they are willing to pay for.

  How are Special Taxes passed?

  Special taxes are earmarked for specific purposes and require a two-thirds vote, also known as a Supermajority.

  What can money gathered from Special Taxes be used for?

  In Bear Valley Springs, the Police Special Tax can only be used for the Police Department, and the Gate Special Tax can only be used for the gate.

• Police Special Tax History

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  In May of 1996, the CSD held a special election in which voters approved the $84 Special Police Tax. At that time, the Special Police Tax covered approximately 65% of the Police Department operations expenses. The Police Special Tax has remained unchanged in the decades since, while operations costs have increased.

  In addition to the Police Department, Bear Valley CSD also had a fully operational dispatch center. Dispatch was funded primarily through property taxes and augmented by a formal contract with the City of Tehachapi for dispatch services and minor contributions from 9-1-1 reimbursement. Police and Dispatch operations combined consumed nearly 70% of the General Fund.

  In 2016 the District introduced a ballot initiative to increase the Police Special Tax to $247 per parcel and included a not-to-exceed 3% annual cost of living adjustment. This ballot initiative failed. To reduce the burden on the General Fund, the Board chose to terminate in-house dispatch services.

  As of 2022, General Fund transfers cover approximately 85% of the Police operations expenditures.

• Gate Special Tax History

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  Before 2006, gate operations were part of the Roads Department. An annual assessment of $340, set in 1996, funds the Roads. As of 2006, 21% of road funds were used for gate operations, significantly decreasing the revenue available to maintain and repair the community's roads. As a result, the District introduced a ballot measure to implement a Special Gate Tax of $75 per parcel per year and place the Gate operations under the Police Department rather than the Roads department.

  This measure achieved the necessary supermajority vote; however, it did not include an annual inflationary adjustment, nor did the revenues cover operations expenses. Over the past 15 years, gate operations expenses have increased while the revenue generated by the Gate Special Tax has not. As of 2022, General Fund transfers cover approximately 60% of the Gate operating expenditures.

• Where we get our information

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  We are using a 20-year model of General Fund revenues and expenses. The model was created for the Board of Directors to illustrate the effects of different Special Tax levels. It incorporates:

  • 20 year General Fund cash flow model
  • 20 year Capital Improvement Plan
  • 20 year Police & Gate expense projections

  This model follows the same format and inflationary indexes as the utility rate studies. It also incorporates the same sustainability goals:

  1. Cover operational expenses
  2. Cover capital expenses
  3. Adhere to the District policy on minimum fund balance

  What does the model say?

  • current expenses exceed current revenues
  • projected future expenses exceed projected future revenues
  • at the present rate, the General Fund will exhaust its excess reserve fund balance within 7-8 years

  There is time to make corrections before that point is reached.

• What do the projections say?

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  As we are right now

  

  When you review the document Operating Surplus/Deficit without Increased PD & Gate Taxes, you will see that:

  • The Gate tax of $75/year has not changed since it was established in 2006.
  • The Police tax of $80/year has not changed since it was established in 1996.
  • Due to the insufficient funding of the police and gate tax, there is an operational deficit of $130, 911 in 2022. By 2041 this becomes $769710
  • The Reserve Fund falls below its required balance in 2029
  • In 2033 the Ending Fund Balance is $170,569 in the red, and the General Fund is insolvent.

  Model 1 - The $100 Gate $180 Police tax model

  

  View this sheet

  The model shown above indicates that with a modest increase to $100 per parcel for the Gate and $180 for the Police Department (77¢ per day), both become sustainable for 20 years, with some General Funds used to make up the difference between special tax revenues and operations expenses.

  Model 2 - The $165 Gate and $300 Police tax model

  

  View this Sheet

  With a more significant increase, this model comes out to about $1.20 per day in increases. This model is similar to the one above in that it would not fully fund the departments but would be sustainable for 20 years. The difference is that this model would restore and strengthens the General Fund reserve.

• Scenario 1 - $100 Gate, $180 PD

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  This is a very bare-bones model that uses the minimum viable tax increase. With this option, the PD and Gate are sustainable for 20 years, but the difference between the tax revenue and the operating expenses will continue to be met by the General Fund.

  This option does not free up much money to address infrastructure concerns.

• Scenario 2 - $165 gate, $300 PD, and strengthening the reserve

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  In the past, the District has failed to develop a comprehensive plan to fund the necessary replacement of equipment and vehicles. The same is true for upkeep and repairs on District buildings and facilities.
  
  All departments were working with decades-old equipment that broke down with alarming frequency. Unfortunately, in some cases, they still are.

  
  

  This is the only street sweeper owned by the District. It is shown mid-repair here. It is a 1980s model that flings debris to the sides instead of vacuuming and removing it from the roadway.

  Fiscal responsibility requires that we anticipate and plan for these replacements. Under the General Manager's direction, Staff worked closely to develop a 20-year Capital Improvement Plan (CIP). This CIP assumes:

  • All departments and divisions are included
  • The plan will serve as a budgetary guideline.
  • The plan does not attempt to predict future price increases
  • Staff will refine actual costs through estimates as each we get closer to each replacement

  The Roads Assessment also has a structural deficit that has not yet been addressed, and this is compromising the road crew's ability to do their jobs efficiently.

  As part of assessing the road department needs, we have to also assess and prioritize the condition of the water mains that run under the roads. It makes no sense to repave the roads, only to destroy them when we replace the underlying water lines. We are working to hire a competent firm to assess and prioritize the 110+ mile water system and anticipate having that process completed within the next two years.
  
  We intend to use excess reserves to meet infrastructure capital needs, particularly in the roads department, in anticipation of beginning major infrastructure rehabilitation projects in the near future.

• What is the process?

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  The General Manager made the Board of Directors aware of the financial forecast during the April 2022 Regular Board Meeting. At that meeting, the Board set a Special Board Meeting date of May 19, 2022. In addition, the General Manager asked the Board for their input on tax increase scenarios to be modeled and discussed.
  
  During the May 19, 2022 meeting, the Board opted to present two scenarios to the public and poll their opinions. In response to public feedback, the General Manager directed the Communications Specialist to form a focus group of the residents who attended to help define appropriate questions for the poll.

  • May 19, 2022 - The Board has a special session to review the General Manager's presentation. They have submitted scenarios they favor to be explored at this public meeting.
  • May 20, 2022 - Online public outreach begins
  • June 1, 2022 - We will send newsletters to all registered members of this site
  • July 1, 2022 - Bear Tracks will arrive in homes, and the official poll will open.
  • July 8, 2022 - The poll will close, and staff will generate reports and submit them to the Directors in preparation for the board meeting scheduled the following week.
  • July 14, 2022 - Board will decide whether to proceed.