On Tuesday, the Davis City Council will get a chance to review draft ordinance language for the renewal of the sales tax. As it stands, the sales tax is one of the most important initiatives that the city will face next year – although there are many important ones. This one generates an estimated $8.6 million in annual revenue.
As the city notes: “The magnitude of the decline of General Fund revenue if the tax measure is not renewed would be dramatic, and the City Council would need to determine how to reprioritize among critical city services, likely reducing or cutting numerous City programs.”
For this reason, the city is likely to be risk-averse – put the measure on the ballot that they know will pass and worry about other revenue needed later.
But I would argue that is probably the wrong approach at this time. In fact, I would argue one of the reasons that the city continues to have a large shortfall that will persist over time is that they have not taken sufficient measures to change that.
And I would argue that they have considerable leeway, based on the polling, to change their approach this time.
In 2014, the city was facing a $5 million structural deficit. At the same time, they were also facing an annual shortfall in the money needed to pay for basic infrastructure. It would be a few years until the city through Bob Leland would articulate that number at $8 million, and some have suggested that the real number could be a good deal higher.
In any case, the city has, since 2014, attempted to put forth a moderate path to addressing this shortfall. In 2014, they decided to put the half-cent sales tax which added to the 2004 sales tax and put the city’s rate at 8.25% – a full percentage point higher than the state level of 7.25 percent.
However, after a long debate they decided to delay an infrastructure tax until the fall of 2014, then, based on polling, they decided not to put an infrastructure tax on the ballot in 2014. The same thing happened in 2016.
In 2018, the council now, armed with the Bob Leland numbers, attempted to put two tax measures on the ballot – one a straight renewal on parks with an inflation inflator. That passed overwhelmingly. The other, a two-thirds majority parcel tax, received 57 percent of the vote, but failed.
So between 2014 and 2018, the city put two taxes on that passed – a half-cent sales and the parks tax renewal, they twice failed to put an infrastructure tax measure on the ballot and, when they finally did, it was a two-thirds tax that lost.
The question now is whether they should remain risk-averse, put the sales tax on for a straight renewal or should they try to expand it. Actually, that is not on the agenda, but there is no reason the council cannot consider that at this time.
First of all, if Davis increased its tax to 1.5 percent, it would mark a half-cent increase again and that would generate around $4.3 million based on current estimates. That is about half what they need, but would be enough, along with the $4 million or so they currently set aside for roads, to close that gap.
Second, by going to 8.75 percent they would be on par with Sacramento, but slightly ahead of West Sacramento and Woodland. Is that really going to be a big deal? You are talking an extra half-cent of sales tax for every dollar you spend. That means if you spend $1000, you would pay an extra $5 than you would pay in West Sacramento and an extra $7.5 than you would pay in Woodland.
That would only really matter if you purchased a car (and for a $20,000 car, you are paying $100 more) and even then, they base your sales tax on your zip code, not where you purchase the car.
They did not poll people’s preference for a half-cent increase, but the numbers for renewal are overwhelming. The initial support they have at 77 percent. Even after pushing the voters in a negative direction, they only drop it down to 71 percent.
Given that, unlike the parcel tax, this is a majority tax that needs 50.1 percent of the vote to pass, and that’s a really good margin.
They did find the fact that the measure would not increase tax to be important for 78 percent of the voters. But again, they have a good bit of cushion to play with here.
There are a few flags in the numbers. The trust of the city to manage tax dollars is fairly strong, but only 62 percent agree with the statement: “I trust the City of Davis to properly manage tax dollars.”
Confidence in the city to solve difficult problems drops a little more, to 58 percent, but is still 58-28 in the positive.
Taxes being “already high enough, I’ll vote against any new tax measure” is 37 percent in support of that statement, so by a 55-37 margin, again closing a bit more, the voters are still willing to consider a new tax measure, which this would be.
At the end of the day, the council has a choice. They can take a sure renewal at this point, barring lightning strikes impacting the political climate in Davis. Or they can take what appears to be a relatively small risk and be able to close more of the immediate hole.
This wouldn’t change the longer-term need for revenue, but it would address some of the immediate needs.
I think it would be irresponsible, given the 71-77 percent support of the tax measure renewal, not to at least consider raising it to where the city of Sacramento is.
—David M. Greenwald reporting