Sierra Madre is small city, approximately 3.5 square miles, with approximately 11,000 residents. It is among the smallest cities in all of Los Angeles County. Sierra Madre has no direct freeway access and a limited retail and service area of approximately 6 blocks. Since its’ incorporation 100 years ago, Sierra Madre has always been, and remains today, a full-service city with its own in-house Police Department, Recreation, Public Works, Water, Sewer, Public Library and Volunteer Fire Department.
The City of Sierra Madre is a primarily residential community with a small business district in the downtown area covering less than one-half mile. As a result, Property Tax makes up a little more than 50% of the General Fund revenues while the Utility User Tax brings in another 35% of the City’s primary income resources. Sales Tax on the other hand makes up only 5% of the total General Fund resources.
Over the last decade, Los Angeles and California economy has grown and more recently collapsed due to the 2004 housing boom and 2008 housing market crash. During the housing boom the City’s property tax collection grew from $2.1 million to $3.1 million between 2004 and 2008. However, these trends stopped in 2008 and now the City property tax collection is $3.4 million in Fiscal Year 2011-2012; a much flatter growth of only 0.5% to 1.0% year-over-year for three years. The County of Los Angeles overall tax collection for 2010-2011 will be negative for a third year in a row. The City of Sierra Madre property tax collection is projected hold steady in FY 2010-2011. For future years, staff has assumed a relatively flat growth if 1.0% for FY 2011-13 with a potential growth of 1.5% by FY 2013-15. These are year-over-year increases.
Sales Tax still remains a small portion of the City’s revenues; however, it is closely monitored for its overall economic indicator. Sales trends usually pick up before the housing market and usually correlate to unemployment rates. While the State Legislative Analyst’s Office and the State Tax Franchise Board are projecting increases in the sales tax, the unemployment rate has not improved in their assumption rates. In addition, the price of gasoline could further weaken the economy as households will be faced with fewer dollars for discretionary spending. Staff therefore has assumed that sales tax will not rebound into the foreseeable future. It may in fact see another decline.