Upland's Challenges
The Current Economic Condition of the City of Upland
The City of Upland finds itself at a critical financial crossroads. Unlike a typical recession where a city's finances suffer primarily because of a temporary economic slowdown, Upland's challenge is largely structural, meaning the City's ongoing revenues have not kept pace with the cost of providing modern municipal services and maintaining decades of aging infrastructure.
While the City has made significant progress over the past several years by reducing spending, improving operational efficiency, aggressively pursuing grants, and modernizing government operations, those improvements have not been enough to overcome long-term financial realities that have developed over many decades.
The result is a city that is operating responsibly but is confronting an increasingly large gap between what residents expect their local government to maintain and what the City's existing revenue system can sustainably support.
Understanding the Difference: A Structural Problem vs. A Spending Problem
Many people assume a city's financial problems are caused simply by overspending.
That is not what has happened in Upland.
The City's financial challenge is better described as a structural imbalance.
A structural imbalance occurs when the cost of providing services increases faster than the revenues available to pay for them year after year.
Unlike a one-time budget shortfall, structural deficits continue growing unless the underlying revenue system changes.
According to the City's adopted biennial budget, Upland projects multi-million-dollar General Fund deficits over the next two fiscal years before balancing actions are taken.
How Upland Reached This Point
1. Property Tax Limitations
One of the largest contributors is California's property tax system.
Because of Proposition 13:
Property taxes are generally limited to 1% of assessed value.
Existing properties can only increase in assessed value by a maximum of 2% annually until sold.
Much of every property tax dollar goes to schools, counties, and special districts rather than cities.
Although Proposition 13 has protected homeowners from dramatic property tax increases, it also means cities receive only modest growth in one of their largest revenue sources.
As infrastructure, labor, insurance, utilities, and construction costs have risen dramatically over the last forty years, city revenues have grown much more slowly.
Upland Is Essentially Built Out
Unlike newer Inland Empire cities, Upland has relatively little undeveloped land remaining.
Its ability to generate significant new revenue through growth is limited because:
the community is largely built out,
redevelopment agencies no longer exist,
only a small number of Community Facilities Districts (CFDs) have been created.
Without major new commercial development, revenue growth largely depends on existing businesses and modest increases in property values.
Revenue Has Not Kept Pace With Inflation
Over the last several decades:
labor costs increased,
pension costs increased,
health insurance costs increased,
fuel costs increased,
construction costs increased,
asphalt prices increased,
concrete prices increased,
utility costs increased.
Meanwhile many of the City's primary revenue sources have grown slowly.
The purchasing power of every tax dollar has steadily declined.
Declining Sales Tax Revenue
Sales tax represents one of Upland's largest discretionary revenue sources.
Unfortunately, sales tax has become increasingly volatile.
Recent financial reports showed:
an adjusted decline of approximately 6.6%,
an overall sales tax loss exceeding 12% in some reporting periods,
weakness in new automobile sales,
declining gasoline sales,
department store declines,
reduced fast-food sales.
Approximately 70% of Upland's sales tax revenue comes from only ten major taxpayers.
That concentration makes City finances particularly vulnerable if only a few major businesses experience declining sales
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