Tuesday, July 22, 2014

Sales tax proposal goes to ballot, but cuts may come, too

From page A1 | February 12, 2014 |

Do Davis residents want to tax their purchases further to help the city balance its budget?

That’s the question that will be posed June 3.

A unified Davis City Council on Tuesday sent a half-cent sales tax increase proposal to voters with the added caveat that the vote also would mean the existing half-cent sales tax add-on would sunset in 2020.

The proposed increase would bump Davis’ 8 percent sales tax to 8.5 percent, commensurate with rates in other cities in the region.

Regardless, in March the council will have to decide between two tough levels of budget cuts to steer the city’s spending plan into the black.

The council could not agree now on a previously publicized $150-per-year parcel tax proposal for infrastructure and parks amenities, instead deciding to take the matter up later as “to be determined.”

Council members opened the discussion Tuesday night about a sales tax increase to fill a projected $5.1 million structural deficit in its general fund by agreeing that they needed to present a unanimous decision to the people.

That made for a painstaking and difficult dance of ideas and solutions between one side of the dais and the other, with Mayor Joe Krovoza often playing referee in the middle when he felt a motion was ripe for voting or vetting.

City Manager Steve Pinkerton added gravitas to the discussion, laying out the damage behind two levels of city budget cuts that, whatever voters decide in June, will have to be taken up by the council in March.

In one scenario, all city departments would take a 12 percent cut, reducing an already trimmed workforce and limiting the city’s ability to do what it does now — plus significant cuts to police and fire services.

In another scenario, public safety sectors would be spared, meaning a 25 percent cut to the remainder of city services.

Councilman Lucas Frerichs set forth the one and only motion of the night, a half-cent increase in the sales tax, with the current half-cent add-on to be extended until 2020, plus leaving the possibility and details of a parcel tax to be determined at a later date.

The original staff recommendation was for a three-quarter-cent raise in the sales tax to bring in $5.4 million in annual revenue. A half-cent tax would generate $3.61 million per year.

With the motion on the floor and a second from Rochelle Swanson, the teeth-gnashing began.

Councilman Dan Wolk wanted both the sales and parcel taxes together at the polls. Swanson worried that, packaged together, they would both fail. Councilman Brett Lee said he wouldn’t support partial measures, especially anything that would “require them to lay off 10 to 15 employees.”

From that point, it seemed the council was leaning toward a three-quarter-cent sales tax again. Then Krovoza weighed in.

“What’s our assurance to the public that 8.75 (percent sales tax) for six years and no advisory (statement) is not a blank check?” he said.

The council debated the merits of a non-legally binding advisory statement, which would tell the voters how the city intended to spend the money. However, council members backed off when City Attorney Harriet Steiner told them that such statements can get the city in legal and political hot water unless they are worded generally, too generally for what the council was looking for.

In the end, Frerichs’ original motion was approved and the ballot part of the budget issue moves onward.

Pinkerton said he will hit the road with a sales tax and budget presentation to Davis area service clubs, parent-teacher associations and neighborhood associations soon.

— Reach Dave Ryan at dryan@davisenterprise.net or 530-747-8057. Follow him at Twitter at @davewritesnews


Discussion | 3 comments

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  • John Troidl MBAFebruary 12, 2014 - 9:44 am

    Revenue from a governmental point of view sometimes has a pretty simple looking formula: Total Sales X Sales Tax Rate = Tax revenue from sales. There are at least three ways to increase sales tax revenue.... 1. increase sales, 2. increase the tax rate * and 3. both. I believe that one of our new candidates for City Council is interested in enhancing the business environment in Davis and thereby strengthening #1. So, my question here is: Does the City of Davis have a "5 Year Plan for Business to Increase Sales Revenue for our Community"? Seems like having a plan to increase sales revenue would be a major motivator for voters considering a sales tax increase. * Economists would argue that increasing the sales tax will DECREASE overall gross sales.... and would then have fun using fancy formulas to try to estimate what that impact would be and if on net, the total revenue generated for the City of Davis would go up or down. Working THESE equations, folks, is kind of key to our ongoing quality of life in Davis.......

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  • SBFebruary 12, 2014 - 12:56 pm

    Why is increasing taxes, utility bills, etc. always the answer? Do we really need the level of services the city provides. How about cutting back the yard waste pickup/street sweeping to every other week, for example? How much would that save?

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  • Rich RifkinFebruary 12, 2014 - 3:23 pm

    SB, the city does not pick up yard waste or garbage. That is done by a private contractor, Davis Waste Removal. DWR is paid by ratepayers, not the general fund. The sales tax increase would go to pay current employees much more in total compensation and to pay for the unfunded medical benefits of current retirees and to a lesser extent to pay unfunded pensions. Reducing DWR's services would not solve the crisis of our general fund. That is almost entirely due to this and past City Council's continually raising the compensation of employees, with no thought of tying that cost to incoming revenues.

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