Eureka Sues Humboldt County

Reporting out of closed session at the beginning of the Eureka City Council’s meeting on Tuesday evening, City Attorney Autumn Luna said the council had voted unanimously, with Councilmember Kati Moulton absent, to initiate litigation against the County of Humboldt and Auditor-Controller Karen Paz Dominguez.

Reached for comment on Wednesday morning, Eureka City Manager Miles Slattery said the Auditor-Controller had failed to adequately respond to a letter from the City Attorney requesting remit payment of the City’s outstanding property tax revenue. “What [the Auditor-Controller] is asking of us is not appropriate,” Slattery told the Outpost.

In the letter, the city attorney asserted that the Auditor-Controller’s failure to distribute the City’s “statutorily guaranteed tax revenue funds” was in violation of Revenue & Taxation Code § 96.1 which states, “property tax revenues shall be apportioned to each jurisdiction pursuant to this section … by the county auditor.”

The letter continued, “Your own website acknowledges your responsibility to ‘apportion and distribute to the various entities the property tax monies collected by the Tax Collector.’ Instead of calculating and distributing the funds as required by law, you are asking that the City of Eureka calculate and file a ‘claim’ in order to receive its funds.”

Luna’s letter asserted that this calculation is “a fundamental aspect” of Paz Dominguez’s duties as a public official, and therefore she cannot delegate it without specific authority from the state legislature. 

Slattery said the letter “did not receive adequate attention” and, as a result, the City decided to take legal action.

Fiscal Year 2022-23 Budget Proposal

The council took a third and final look at the budget proposal for Fiscal Year (FY) 2022-23. After two years of significant budget cuts, the City of Eureka is expecting a $1.6 million budget surplus in the upcoming fiscal year.

City Finance Director Lane Millar noted “a large improvement” in the budget forecast for the City’s major funds, specifically the General Fund, for fiscal year 2022-23. “Things are going really well, so how do we [continue to] increase that number?”

Millar went through several options to achieve the council’s goal of building up six months of reserves, as discussed during the council’s last meeting on the subject. He suggested making annual contributions to the reserve over the course of 15 to 20 years rather than a more aggressive five to 10-year plan which “could become risky in the future.”

“When I put these [options] together … and I look at the average based on those options, I think anything close to the average, which is 16.4 years, is a good target,” he said. “…In terms of the amounts, I think something that reflects the average of both the beginning and end amount for all these different options for a total of $927,000 is also a good midpoint. … I think that builds in some flexibility.”

Because the City has a budget surplus in FY 2022-23, it could begin with a higher amount, Millar suggested. Down the road, the City could adjust or lower the amount to grow over time.

Before turning to the council for discussion, Millar acknowledged an oversight in the City Attorney’s budget to the tune of $110,000. “That was my mistake. I’d like to transplant it into our non-departmental division within Fund 650 where the City Attorney lives,” he said. “… Her budget showed a growth rate of, like, 62 percent … but that true figure is more like 39 percent.”

Councilmember Leslie Castellano asked about the possibility of creating a policy to maintain the six-month reserve plan to ensure it stays on course. Millar said staff had planned to bring a policy proposal forward in late August or early September but said he wasn’t sure “if you can set that in stone.”

Castellano made a motion to adopt the budget for fiscal year 2022-23, as amended, which was seconded by Councilmember Kim Bergel. The motion passed 4-0 with Moulton absent.

Vacation Rental Update

The council also received an update on the management of vacation rentals in the City. Earlier this year, the City hired a consultant to take an inventory of vacation dwelling units, such as Airbnbs or VRBOs, “to get everybody registered and into compliance,” Slattery said. 

In the coming weeks, operators will be able to register their vacation rentals through the City’s website, Millar explained. “You’re just registering for the purposes of paying your taxes. … Once you get in and you’ve identified your address and provided the contact information, this is where you can go report and pay your taxes.”

This is the first step in a very long process of getting vacation rentals permitted through the City, he added. 

Councilmember Scott Bauer raised concern about the impact of increasing vacation rental properties given the City’s critical housing needs. “When do we cut it off?” he asked. “When do we say, ‘If you’re not in in six months, we’re going to create a limit to the number.’ I think we should create a limit to the number of vacation dwellings we have.”

The council will have a chance to consider limits on vacation rentals once the registration and compliance process is complete, Slattery said. 

The council did not vote on the item but directed staff to bring the matter back to the council at a future date.

A recording of the meeting can be found here.