Visalia’s new Parks and Recreation Master Plan should be ready for the city council’s final consideration by spring of 2027. It will likely include a long-anticipated aquatics center, a new recreation center and ongoing development of the 148-acre East Side Regional Park. To make the future plans a reality, however, City Hall will have to do some fancy financial footwork.
Unfolding a Financial Paper Tiger
On paper, the city is currently looking at an enormous budget deficit – around $44.5 million by the end of fiscal year 2029/2030 – in the Parks and Rec Facility Impact Fee Fund. Yet the situation probably isn’t as dire as it seems at first glance.
Impact fees levied by the city for new homes cover the cost of providing more parks as the city grows. Or they’re supposed to. As it stands, the fund will be $3.15 million in the red by the end of the current fiscal year on June 30.
If nothing is done to prevent it, that deficit will continue to mount until it reaches $44.5 million by June of 2030. However, no Parks and Rec projects have appropriations beyond the current city budget, meaning those projected deficits don’t exist yet except in spreadsheets. So beyond the current city budget cycle, nothing is set in stone.
“These are all projected projects,” city manager Leslie Caviglia explained. “You can still change some of those going forward.”
Some can be changed in the updated Parks and Rec master plan, but others can’t. For those the city is already looking at new ways to pay. Voters might even be asked to approve new or increased taxes to foot the bill.
The Problem Now and the Problem Later
In fact, it’s actually two different Parks and Recs funding issues the city is facing. One is a glaring sign the city must find new ways to raise revenue, hiking development fees to more adequate levels as a likely part of the solution. The other is an immediate problem involving financing shortfalls in ongoing projects that have to be filled.
This fiscal year, the Parks and Rec Impact Fees Fund started with a $12.1 million balance. The collection of impact fees and interest added another $2.1 million. But capital expenditures and operating costs will top $18.4 million, leaving a $3.15 million deficit when the dust settles.
The deficit isn’t due to poor planning, but to unexpected cost increases since the cost of the projects was estimated.
“The budget was too low compared to what the project cost is coming out,” said city finance and technology director Renee Nagel.
Four projects are responsible for the cost overruns: a new dog park, new parking lots at the Riverway Sports Park, a neighborhood park for the Pearl Woods subdivision, and a park with playgrounds specifically designed for ADA accessibility for which the city has already received state grant funding.
In all, the four projects are underfunded by $10.1 million. The biggest gap is a shortfall of $4.5 million in the $7.6 million cost of Pearl Woods Park. Plans for Pearl Woods and another park at the Elliot Properties subdivision were to be shown to the city council at its meeting on December 15, but the presentation was delayed.
When the presentation happens, it will come with a request for additional funds.
“These are two parks that are budgeted that have a little bit of a shortfall as well,” Nagel said. “Staff will be asking to transfer funds from some of the existing projects to be able to fund some of these shortfalls.”
Council approval will be required to adjust the budget to settle the deficit when the request comes.
Park and Rec Impact Fees Have to Increase
As City Manager Cavilgia noted, the city’s current Parks and Rec plans are subject to change by the city council. As the new Parks and Rec master plan is put together over the next 15 months, the shortfalls in the Impact Fees Fund won’t simply disappear as projects are altered, added or removed. The shortfalls may even grow, as the current five-year plan doesn’t include finishing the East Side Regional Park or construction of an aquatics center, both of which are council priorities.
And so City Hall staff is already putting together alternate funding sources, and the plan will be followed by a set of strategies for financing whatever projects it includes.
The most obvious target is the schedule of impact fees. The city’s current fee schedule is extremely out of step with the cost of park development, and finance director Nagel said she intends to recommend the city council increase the impact fees rates.
“It’s definitely not enough to cover the cost of constructing a park today, or to do any improvements and expansions,” she said. “So the fee is definitely behind.”
Based on the current impact fee schedule and the average rate of home construction, the city collects approximately $2.6 million a year from developers. That’s not much compared to what it expects to spend annually on parks. Nagel gave a stark example of the fund’s weakness.
“Based on Pearl Woods Park – the estimated cost is $7.5 million – the entire fee for three years would need to be dedicated for the park, which equates to 1,568 single-family houses at today’s cost that we have for this impact fee,” she said.
Long-Term Financing Gaps Need Long-Term Fixes
Nagel presented four other possible sources of additional revenue. The city could increase its tax on hotels and short-term occupancy rentals, and each 1% increase would bring in $500,000 a year. A cannabis retail sales tax could also provide a similar amount. The city could institute a utility user tax producing $2.5 million annually on a 6% rate; in Tulare County, only Visalia and Farmersville charge no utility tax.
The biggest possible source of income could come in the form of a voter-approved increase in the city’s sales tax. The sales tax cap in California is 9.25%, and Visalia’s is below that at 8.5%. Each increase of 0.25% would generate an estimated $9 million a year, meaning pushing the rate to the limit would increase the city’s income by $27 million annually.
Whatever approach the city chooses, the time to act is now, Nagel warned.
“Those are the options we discussed that are long-term ones, but will actually bring in enough to start making a difference with these larger projects, like the regional sports park, an aquatic center,” she said. “There are several large projects that (the council) would like to be done. The council has talked about them for several years, and it’s just not going to get cheaper.”
Not only does hiking the sales tax rate generate the most income, it also spreads the burden to everyone who makes purchases in the city.
“I don’t like raising taxes, but at least this puts the onus on the residents. If they want better parks, then they can vote for the sales tax,” said Councilman Brian Poochigian. “But it’s just not the residents of Visalia who are paying for this. All the visitors are paying for that.”
Putting the funding question before voters also allows the public to set the city’s parks and recreation priorities directly, an aspect Mayor Brett Taylor mentioned when describing sticker shock from the cost estimates for a new aquatics center.
“We were hit with a pretty big price tag of $15 to $30 million range,” Taylor said. “Obviously with that fund being in the hole, the discussion we’re going to have to talk about is if the community really wants those types of facilities.”