Local News

City to consider placing tax on ballot

By From page A1 | June 08, 2014

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What: Davis City Council meeting
When: 6:30 p.m. Tuesday
Where: Community Chambers, City Hall, 23 Russell Blvd.

Watch it: Live on Comcast Channel 16 or AT&T U-Verse Channel 99, or as streaming video at www.cityofdavis.org/media

With one tax passed June 3, the City Council may press for another in November.

Fresh from the victory of Measure O, the half-percent sales tax hike that will help the city cover part of a deficit in its operating budget, the City Council may place another tax on the November ballot to deal with Davis’ crumbling infrastructure.

Measure O raised the city sales tax rate from 8 percent to 8.5 percent and eventually will generate an estimated $3.6 million in yearly revenue. But although a group supporting the sales tax advertised it as paying for “vital repairs to our roads, sidewalks and bike paths,” it can be of only limited help in those areas, especially while the city tackles its long-term strategy of building innovation centers to bring in jobs and tax revenue.

The City Council must find another way to fund pressing repairs to its crumbling infrastructure, from roads to a new downtown fire station.

City staff is recommending that the council place some kind of ballot measure — a parcel tax or general tax measure — on the ballot either in November or as late as June 2016 if it’s a general tax.

The type of tax is important because it determines the risk of it passing muster with voters. Parcel taxes are temporary taxes attached to a property tax bill that require a two-thirds vote of the people. A general tax, such as a utility users tax described in the staff report, could pass with a simple majority.

“Utility users tax is easy to collect and administer, it tracks with inflation, it applies to a broad range of the population (e.g., homeowners, renters, businesses) and it is not as sensitive to economic downturns as the other general taxes,” the report said. “The tax may be levied on electricity, gas, garbage, water, communications, sewer and/or cable television.

“The 2012 State Controller’s Report identifies 145 California cities that have a utility users tax with rates that range from 1 to 10 percent, with most ranging between 3 and 7 percent.”

Importantly, Interim City Manager Gene Rogers, the author of the staff report, has wide-ranging experience helping to pass utility users taxes in budget-challenged cities. He helped pass a tax in Moreno Valley and Coachella.

“To balance the budget without drawing on reserves is projected to require about $1 million per year,” Rogers notes. “In addition, as noted, there are significant unfunded maintenance, rehabilitation and other capital projects for which there in no available funding source.

“With the city’s annual general fund needs being several million dollars, increases in the business tax and transient occupancy wouldn’t generate enough revenue to do anything more than put a dent into the problem.”

With a sales tax just passed, that option is likely off the table for the time being. Rogers noted there are other pitfalls, too.

“A sales tax increase of one-quarter-cent would produce about $1.8 million annually,” he wrote. “The cumulative sales tax percentage, however, may be reaching a threshold where it is perceived to be on the high side.”

The city also might ask for an increase in the existing parks parcel tax, to take over the entire $6.9 million parks budget and release some general-fund money to pay for other needs.

The City Council also might not decide on an option right away. It could save further discussion for after a planned June 17 study session to analyze its choices further.

— Reach Dave Ryan at [email protected] or 530-747-8057. Follow him on Twitter at @davewritesnews

Dave Ryan

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