News - Local - North Coast

Sunday, Jul. 27, 2008

Morro Bay Fishing Industry Special Report: A struggle to stay afloat

With its once-lucrative catch now a sliver of its former self, Morro Bay is in the midst of a sea change. At stake are not only the city’s iconic image as a fishing village but its financial health as well.

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Morro Bay is facing a crisis. Its once-thriving fishing industry is teetering on the brink of extinction.

Ever-increasing regulations and restrictions, coupled with soaring fuel prices, have reduced the amount of fish caught locally by nearly 91 percent since 1990.

“When is enough, enough?” asked Mark Tognazzini, a fisherman, fish buyer and seafood restaurateur in Morro Bay. “Our backs are against the wall.”

So few fish are being caught that ice vendors, marine fuel businesses and tackle shops are closing — the very infrastructure needed to support the fishing industry.

As the industry has suffered, so have city finances. If the commercial fishing

boats lining the Embarcadero are lost for good, part of Morro Bay’s allure to tourists — and revenue—will be lost as well because it’s long been dependent on fishing to help pay for city services.

The city’s financial picture has worsened steadily since 2002-03. Despite budget cuts, the city has spent more than it has taken into its general fund every year except one.

That was in 2005-06 after the city received an increase in property and hotel tax revenue along with a large one-time payment for its outfall lease for the Morro Bay Power Plant with then-owner Duke Energy.

The budget gap is projected to widen.

A recent economic consultant’s report predicts that by fiscal year 2017-18, the city’s spending would exceed revenue by nearly 15 percent if it continues its current service levels and if revenue keeps up with the pace of inflation.

And the cumulative deficits would add up to nearly $14 million by fiscal year 2017-18, according to the report.

This gloomy forecast has prompted city officials to evaluate operations and to look for new ways to generate revenue or reduce services further.

Already, Morro Bay officials have reduced staff by 13 percent since 2002-03—to about 107.

Of that, general-fund staffing —which excludes self-sufficient departments such as water, sewer and the harbor—is down 19 percent—to about 79 budgeted full-time equivalent positions.

In 2006, Morro Bay was one of four cities in San Luis Obispo County in which voters approved a half-cent sales tax rate increase. It generated about $650,000 in its first year.

The City Council also increased developer fees about 500 percent, bringing them on par with the rest of the county. Builders pay these fees to help pay for infrastructure improvements needed to handle growth.

In the wake of tighter budgets and shorter staffing levels, city officials earlier this year hired government consulting firm Management Partners Inc. of San Jose to re-evaluate operations.

A brief windfall

The city prospered financially during a short surge in revenue from the power plant during the state’s electricity crisis from 2000 to 2001.

A chart showing projected general-fund revenue and expenses shows that city spending soared about 64 percent between 1998 and 2002.

Though spending dropped slightly immediately after 2002 and has stabilized in recent years, it’s still 58 percent higher than a decade ago.

According to June 1999 budget documents, the sale of the power plant from Pacific Gas and Electric Co. to Duke Energy resulted in new revenue and made it possible for city leaders to add “badly needed staffing.”

Most of the extra money received then was spent on buying real estate such as the former Flippo’s Surfside Skate Harbor on Atascadero Road in October 2001. City leaders anticipated building a teen center there.

When a better location for the center was found at the former Paradise Island Fun Park across the street, the city decided to sell the former skate rink. The city made about $470,000 in profit when it sold the property in 2005.

In October 2002, the City Council approved the purchase of the property once home to Brannigan’s Reef Restaurant and Bayview RV Park.

The restaurant site, which except for a brief stint hasn’t served customers since 1995, has been eyed for years as a potential conference center. The former RV park is now a public parking lot.

City officials also used the extra money to replace critical equipment such as a police car, a pothole patch truck and a recreation and parks vehicle, setting aside the rest for reserves.

In recent years, however, as revenue tapered off, the city has been forced to start balancing its budget by using its reser ves and by reducing expenses, including eliminating several positions.

Tough recommendations

The consultant’s report shows that if the city does not adopt any of the 34 recommendations to cut costs, general-fund expenses in the 2017-18 fiscal year could reach nearly $14 million while revenue would reach only about $12 million.

The study recommends saving money by contracting the city’s police and fire services with the Sheriff’s Department and County/Cal Fire, respectively.

City officials could also make immediate changes such as selling surplus property or levying new taxes on local residents, according to the report.

All taxes would require voter approval. Together, these would raise a few million dollars annually to pay for basic city services such as street maintenance and to replenish the general fund.

The Morro Bay Firefighters Association has already begun to address its need to respond to an increasing number of calls each year.

A committee made up of fire Chief Mike Pond, a member of the firefighters’ association, two City Council members and a retired San Luis Obispo police chief has been developing a long-term goal for the city’s fire services.

Part of that strategy includes the possibility of the city contracting its fire services.

Fire officials said the department wanted to develop ways to address the increased number of calls over the past decade while maintaining the same staffing levels since 1969.

Most of the department’s calls are medical-related.

But the potential partnership also questions the city’s willingness to lose a hometown fire department.

“The city of Morro Bay is in a difficult financial position and is unable to continue with status quo operations,” according to the Management Partners report. “Many tough budgetary choices have already been made —and yet the financial picture continues to grow bleaker.”

Reach David Sneed at 781- 7930 and Sona Patel at 781- 7924.