A three-quarter-cent sales tax increase may not seem like a lot of money, but Ken Bradford, owner of Ken’s Bike-Ski-Board thinks it will hurt his business and hurt Davis. He’s not alone.
In a letter to City Council members on Jan. 28 Bradford said a sales tax will drive his customers away, because so-called “big ticket” items will be cheaper in other cities. But more than that, local customers will be more likely to buy from the Internet, without the benefit of the service Bradford’s shop provides customers.
Davis’ current sales tax rate sits at 8 percent. On UC Davis’ campus, the rate is 7.5 percent, according to the Board of Equalization. West Sacramento has an 8 percent sales tax rate, while Woodland has an 8.25 percent rate. Sacramento is the most expensive at 8.5 percent, while Dixon is the cheapest at 7.625 percent.
The Davis City Council is likely to place a 0.75-percent raise to the city’s sales tax on the ballot, which if passed by a simple majority of voters would make Davis the most expensive out of nearby cities.
The $5.4 million it is estimated to bring into city coffers will pay for a $5.1 million structural deficit fueled mostly by health care costs fueled by public sector retirees fueled by generous and now controversial labor contracts over years.
A Jan. 28 city staff presentation to the City Council showed Davis receiving a miniscule share of sales tax revenue per capita compared to nearby cities and similar-sized college towns like Palo Alto. Davis was compared to towns with Wal-Marts and malls, and in the case of Farifield, both.
Although the city said it passed the sales tax proposal through a focus group attached to a subcommittee, Kemble Pope, Director of the Chamber of Commerce, surveyed 165 of his members and found grave doubts about the city’s sales tax initiative.
A full 42 percent said they had no idea, on the day the City Council was to take up the idea a second time, that the city was in a fiscal crisis. And roughly 74 percent said the city should further reduce its expenditures either robustly or somewhat. Unsurprisingly, 68 percent said the city should dedicate more resources to economic development.
Which takes us back to Bradford’s mom-and-pop store, a kind of store common downtown. It separates Davis’ downtown from many other cities’ abandoned cores.
Bradford indicated big-ticket buyers would go elsewhere.
“A further three-quarter-percent increase in the local sales tax would probably send many big-ticket buyers outside Davis, just to avoid the tax,” Bradford wrote in his letter. “Suddenly that $2,000 bed or bicycle with the same retail price as online would cost the shopper $175 more in Davis … please do your best to find another revenue stream, whether that’s a parcel tax, attracting more tech business, or whatever — exacerbating the current Sales Tax inequity could be highly counterproductive.”
One area that would not be affected much would be the auto dealerships. Dan Kokotas, general manager of the Swift dealership said something people don’t realize is that a person in the state of California pays sales tax from the city they live in, not the city they buy the car in. San Franciscans who buy cars at his dealership often are surprised by that.
That doesn’t mean he’s for a sales tax increase.
“It’ll make local residents who want to buy a car less likely to buy a car because it’s more expensive,” he said.
— Reach Dave Ryan at 530-747-8057. Follow him on Twitter at @davewritesnews