Redwood City – For months, County of San Mateo leaders have voiced concern over the potential loss of a key revenue source, saying the situation may threaten vital safety-net services.
Now, with no resolution in sight halfway through the 2023-24 fiscal year, County Executive Mike Callagy on Tuesday recommended the Board of Supervisors hold a special study session on a looming issue that could also impact future spending plans.
“We are short $69 million,” Callagy said during Tuesday’s regularly scheduled Board of Supervisors meeting. “This is something we’re working with our (state) legislators on. That would be a significant blow to this County, and it only grows every year.”
The potential deficit is fueled by potential cutbacks in what’s known as in-lieu Vehicle License Fees, or VLF, a form of property tax on the ownership of motor vehicles. Under a long-established agreement, cities and counties receive additional property tax from the state to replace revenue that was cut under a two-decade-old budget deal.
The state’s latest budget proposal released by the governor’s office in January does not include full VLF funding. This could also pose a threat to budgets in local cities that also receive VLF revenue.
“This will impact public safety and direct services that the cities and County provide to our most needy population if this is not funded by the state,” Callagy said. “And certainly we believe it is owed to us by the state.”
Local governments in San Mateo County would face the loss of more than $114 million before the end of the fiscal year on June 30, 2024.
Supervisors expressed concern for the area’s most vulnerable residents.
“Our continued focus must be on expanding opportunities for everyone and this begins with ensuring we have a robust array of programs and services to meet the needs of individuals and families,” said Warren Slocum, president of the Board of Supervisors.
“Our residents want to make ends meet, to put food on the table, to pay for college, to save for retirement. It’s our job as elected officials,” Slocum said, “to work with our partners in the state to ensure that 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 projected VLF shortfall comes amid a set of growing financial concerns.
At today’s Board meeting, Callagy and Chief Financial Officer Robert Manchia presented the Fiscal Year 2023-24 Mid-Year Budget Update, a snapshot of economic and demographic trends that drive both the need for services and the revenue available to pay for them.
With an end to the COVID-19 public health emergency, the County has shifted “its focus from pandemic response and recovery towards strategic, long-term planning,” according to the report.
The report outlines “opposing trajectories” for key economic indicators. Unemployment overall remains low, the cost of goods and services is rising for everyone and median household income is moving in different directions for certain demographic groups.
Median household income, however, has fallen for Black or African American households (10.2 percent decrease from 2021 to 2022). Significant disparities exist between median household incomes for Native Hawaiian and Pacific Islander households and certain other demographic groups (41.8 percent of Asian household income, for instance).
The report provides current data, from U.S. Census reports and other sources, on income inequality, the poverty rate, rents and home prices, child care costs and other information.
The rising cost of living (3.4 percent increase in consumer prices from December 2022 to December 2023) and the hurdles of finding affordable housing pose challenges for many.
Manchia checked local websites for apartment rentals. The search for a one-bedroom apartment shows current asking rents of more than $2,800 in both Redwood City and San Mateo. (It takes an income of roughly $100,000 annually to afford such an apartment, under a commonly used “30 percent rule” where people should spend no more than 30 percent of gross income on rent.”)
The report states that “demographic trends indicate an aging population with relatively fixed incomes struggling to keep pace with rising costs. If this trend persists, there may be an increased demand for County services to address these evolving needs.”
Michelle Durand
Chief Communications Officer
mdurand@smcgov.org