Northern Branch Jail Operating Cost When They Build It You Will Pay

Conclusions 5

• CL1
  The public may not be informed concerning the potential impact that Northern Branch Jail operating cost may have on staffing and services provided by other departments.
• CL2
  The Santa Barbara County Jail Northern Branch Fiscal Analysis, Facts & Figures published in November 2008 is outdated.
• CL3
  The County Fire Department is allocated 25 percent of property tax increases; for property tax increases of 3.5 percent, the current plan allocates 28 percent of property tax increases for NBJ, leaving the County with 47 percent of property tax increases for all other departments.
• CL4
  The Office of the County Assessor appears not to have the expertise to take full advantage of the potential for additional property tax revenue based on higher assessments of specialized industries such as oil and gas, wineries, and upscale hotels.
• CL5
  After numerous interviews with County officials and reviewing substantial amounts of data, the Santa Barbara County Grand Jury is concerned that the plan adopted by the Board of Supervisors to fund the future operating cost of the Northern Branch Jail complex requires both an improving economy and fiscal discipline. The most experienced of those officials are the most conservative in their estimates and, like the Jury, are cautious in their view of whether the county’s plan will 13 Ibid., p. 4 of 4 14 Northern Branch Fiscal Analysis Report D-7 Nov 4 2008, Item 12-00752 of BOS Meeting, October 2, 2012, Attachment J (https://santabarbara.legistar.com/View.ashx?M=F&ID=2137868&GUID=5F43D666-CB37-4165- A80C-368527865756, last visited on May 5, 2014) 2013-14 Santa Barbara County Grand Jury 7 NORTHERN BRANCH JAIL OPERATING COST be successful. The Jury analysis presented in the Appendix Table A-1 estimates that the plan has a 50-70 percent chance of success. Should the execution of this plan not meet expectations, there is a significant probability that either a fee or tax assessment, or a reduction in services will be necessary. The Board of Supervisors is responsible for maintaining focus on this issue. Citizens are responsible for assuring that the Board does so. FINDINGS AND RECOMMENDATIONS Finding 1A The current plan to fund Northern Branch Jail operating cost is based on estimates of property tax increases of no less than 3.5 percent per year. Finding 1B The plan is based on the Board of Supervisors exercise of discipline necessary to allocate roughly 28 percent of the property tax increases to the reserve fund through FY2022-23. Finding 1C According to the results in Figure 2 and Table A-1, the probability of the success of the Northern Branch Jail operating plan is most likely to be in the range of 50 to 70 percent. Recommendation 1 That the County prominently display data graphically on the County website and distribute to news media the reserve fund balance superimposed on the planned balance as shown in Figure 5 below, to disclose annually whether funding goals are being met. 2013-14 Santa Barbara County Grand Jury 8 NORTHERN BRANCH JAIL OPERATING COST Figure 5. Recommended format for displaying reserve fund Plan versus Actual (hypothetical for 2015 and later) Finding 2 The County Fire Department is allocated 25 percent of property tax increases; for property tax increases of 3.5 percent, the current plan allocates 28 percent of property tax increases for NBJ, leaving the County with 47 percent of property tax increases for all other departments. Recommendation 2A That the County show both the annual property tax increases values and percentage increase over prior year on the County website and distribute to news media in a format similar to Table 3 below. County Property PTI Ratio of Ratio of Plan Funding Reserve Property Tax Available Year's Percentage FD Allot NBJ Allot Increase Fund FYE Tax Increase to All Contribution Increase to Total to Total Over Prior Balance Revenue (PTI) Other to NBJ ($M) PTI PTI Year ($M) ($M) ($M) ($M) Depts 2012 174.4 2.4 1.40% 0% 42% 58% 1.0 1.0 1.0 2013 176.2 1.7 1.00% 338% 57% -296% 1.0 2.0 0.0 2014 183.4 7.2 4.10% 25% 18% 57% 1.3 3.3 3.3 2015 190.2 6.9 3.74% 25% 19% 56% 1.3 4.6 7.9 2016 195.2 5.0 2.61% 25% 30% 45% 1.5 6.1 13.7 2017 205.0 9.8 5.04% 25% 15% 60% 1.5 7.6 18.6 2018 210.0 4.9 2.40% 25% 30% 45% 1.5 9.1 17.2 2019 212.2 2.2 1.06% 25% 81% -6% 1.8 10.9 10.8 2020 226.9 14.7 6.92% 25% 12% 63% 1.8 12.7 5.6 2021 240.5 13.6 5.99% 25% 16% 59% 2.2 14.9 2.1 2022 251.1 10.6 4.42% 25% 21% 54% 2.2 17.1 0.2 2023 261.3 10.2 4.06% 25% 22% 53% 2.2 19.3 0.0 2013-14 Santa Barbara County Grand Jury 9 NORTHERN BRANCH JAIL OPERATING COST Table 3. Displays property tax increases and allocation. Data for 2014 are estimated; data is hypothetical for 2015 and later and are not intended to be predictions but are intended for format only. Recommendation 2B That the County prominently display a graph similar to Figure 5 below, on the County website and distribute to news media that contains the annual percentages of property tax increases allocated to Public Safety (Probation, Fire and Sheriff’s Office), (2) Northern Branch Jail, and (3) all other departments. 120% 100% 80% 60% 40% 20% 0% -20% -40% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Figure 5. Example displaying percentage of PTI allocated to Northern Branch Jail, Fire and All Other Departments. Data for 2014 are estimated; data are hypothetical for 2015 and later and are not intended to be predictions but are intended for format only. Finding 3 The public may not be informed concerning the potential impact that Northern Branch Jail operating cost may have on staffing and services provided by other departments. Recommendation 3 That the Board of Supervisors communicate with their constituents, at least annually, concerning staffing and service cuts, revenue enhancements, or other options that may be necessary to fund Northern Branch Jail operating cost. 2013-14 Santa Barbara County Grand Jury 10 egatnecreP yb noitacollA ITP %95 %24 %833 %75 %592- %75 %52 %81 %65 %52 %91 %54 %52 %03 %06 %52 %51 %54 %52 %13 %52 %18 %6- %36 %52 %21 %95 %52 %61 %45 %52 %12 PTI Allocation: NBJ, Fire, and All Other Departments NBJ Fire All Other Departments NORTHERN BRANCH JAIL OPERATING COST Finding 4 The Office of the County Assessor appears not to have the expertise to take full advantage of the potential for additional property tax revenue based on higher assessments of specialized industries such as oil and gas, wineries, and upscale hotels. Recommendation 4 That the Board of Supervisors collaborate with the County Assessor to assure the Office of the County Assessor has adequate capacity and expertise to optimize property tax receipts from specialized industries. Finding 5 The Santa Barbara County Jail Northern Branch Fiscal Analysis, Facts & Figures published in November 2008 is outdated. Recommendation 5 That the Board of Supervisors update and publish the referenced report to revisit options that could mitigate any shortfall in operating cost if and when that shortfall becomes apparent. REQUEST FOR RESPONSE Pursuant to California Penal Code Section 933 and 933.05, the Jury requests each entity or individual named below to respond to the enumerated findings and recommendations within the specified statutory time limit: Santa Barbara County Board of Supervisors – 90 days Findings 1A, 1B, 1C, 2, 3, 4, and 5 Recommendations 1, 2A, 2B, 3, 4, and 5 2013-14 Santa Barbara County Grand Jury 11 NORTHERN BRANCH JAIL OPERATING COST

Observations 14

• OB1
  The NBJ plan does not account for the impact of Measure “M”, the June 3, 2014 ballot initiative that, if passed, would allocate approximately $20 million per annum to deferred infrastructure maintenance costs
• OB2
  Any catastrophic event (e.g., drought, fire, earthquake, or other act of nature) may derail these plans
• OB3
  Any significant refurbishment or redesign of the existing Main Jail will require additional funding whose source has not been identified12
• OB4
  Senior county officials acknowledge the inability to forecast real property assessments accurately more than three years in advance
• OB5
  The County Fire Department has already been budgeted 25 percent of the PTI over the next several years, and this is achieved directly through permanent tax transfers, removing it from discretionary revenue
• OB6
  With the NBJ budgeted a prescribed dollar amount of annual PTI for the reserve fund, when combined with the Fire Department allocation, less than 50 percent of the PTI is likely to be available to all other County departments through FY2022-23 Figures 3 and 4 show the proportion of anticipated PTI for Fire, Sheriff, NBJ and all other 12 Agenda letter to BOS from CEO Wallar, April 16, 2013, p. 3 of 4 Board Letter of 4/16/2013 (https://santabarbara.legistar.com/View.ashx?M=F&ID=2408611&GUID=8B991D61-C5A4-4BA2-84A9- FA32B0FDC7F7, last visited May 5, 2014) 2013-14 Santa Barbara County Grand Jury 5 NORTHERN BRANCH JAIL OPERATING COST departments for two Jury-generated scenarios with constant PTI values of 3.5 percent and 2.5 percent. Comparison of these two charts shows a reduction in PTI allocation for “all other departments” if the 3.5 percent PTI is not realized. Allocation of 3.5 Percent PTI Through 2023 Fire All Depts 25% Other Than Fire & Sheriff 40% Northern Branch Jail 28% Sheriff 7% Figure 3. Percentage Allocation for PTI of 3.5 percent Allocation of 2.5 Percent PTI Through 2023 All Depts Fire Other Than 25.0% Fire & Sheriff 33.5% Northern Branch Jail 36.0% Sheriff 5.5% Figure 4. Percentage Allocation for PTI of 2.5 percent. 2013-14 Santa Barbara County Grand Jury 6 NORTHERN BRANCH JAIL OPERATING COST The Jury concludes that additional revenue may be required to help fund the operating cost of the NBJ, because:
• OB7
  Costs may exceed the allotted PTI
• OB8
  When accounting for needs from deferred maintenance, cost of living increases for other County employees, and other demands, the addition of NBJ Operating Cost may overburden the County, making it difficult to meet its obligations to all stakeholders
• OB9
  Matching agreements with State and Federal governments may jeopardize the County’s option to cut services in order to meet budget goals13 For the current funding plan to work, the following must also be addressed:
• OB10
  Ensure the Assessor’s office has expertise to take full advantage of potential PTI, particularly with regard to specialized industries such as oil and gas, wineries, and upscale hotels
• OB11
  The BOS must be vigilant in adhering to the plan. Newly elected Supervisors are likely to have their own priorities that could divert funding away from the plan In 2008 the County published options for funding NBJ operating cost.14 The alternatives identified in the analysis for substantially funding the NBJ operating cost were:
• OB12
  Parcel Tax: $150 per annum assessment on each of 120,000 parcels yielding $18 million annually
• OB13
  Sales Tax: ¼ percent assessment yielding $16 million annually
• OB14
  Utility Users’ Tax: 6 percent assessment on gas, electric, water, phone, and cable TV for all residents of unincorporated areas of the county, yielding $15M annually None of these options is likely to be embraced by county voters. Other options need to be considered, such as a special NBJ assessment, a salary freeze, an across-the-board budget freeze, and staff layoffs (which would cause a reduction in services). Similar to tax increases, none of these options is palatable. Nonetheless, there is an uncomfortably high probability that PTI will not be adequate, thereby creating a fiscal deficit that will require cuts to County services, a salary freeze, layoffs, a tax increase, or some other painful option.

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