Sunday Commentary: Given the Polling, Should the City Consider Raising the Sales Tax?

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


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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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15 Comments

  1. Alan Miller

    Given the Polling, Should the City Consider Raising the Sales Tax?

    No.

    I seem to remember taxes going up in the past.  The roads have giant cracks.  It’s a rat wheel.  Spin and spin, never reaching the destination.  At some point taxes and debts overwhelm the willingness of taxpayers to fund a broken system, and the ability of politicians and the Vanguard to convince them that the ‘next’ tax increase will be the Nirvana we’ve all been looking for.

    1. Bill Marshall

      Tend to agree with Alan… perhaps for different reasons… some are apparently the same…

      That said, I support the continuance of the levy, and I question why someone  would 1.5 X ‘double’ down and risk no continuance of the current levy… based on playing around with polling %-ages… can see an effective “bait and switch” campaign that would not only result in a defeat of the measure, but would also ‘sunset’ the existing provisions… does the word “pyrrhic” come to mind?

      Funny that a number of commenters have concerns of the financial risks of not going to district elections, yet some of those same folk are willing to risk a more or nothing outcome… “funny”, but not as “ha-ha”… $8.6 million at stake… roll dice and go for $12.9… or $0.00?

      It’s a strange, strange world we live in…

    2. David Greenwald

      Alan: You’re actually arguing that they shouldn’t consider it? They shouldn’t do the evaluation and weigh the positives and negatives? They shouldn’t determine how much they need? My argument was for consideration, I’m not sure I support a tax, I do support the council having a full range of options before it.

  2. Tia Will

    Alan

    the ability of politicians and the Vanguard to convince them that the ‘next’ tax increase will be the Nirvana we’ve all been looking for.”

    Except for one inconvenient fact. No one has ever promised a tax increase would represent Nirvana. How about a tax increase representing residents responsibly paying for the amenities that almost everyone uses. For example, I have essentially stopped driving & biking locally. I still want the streets, sidewalks, & green belts maintained at safely passable levels and am happy to pay a reasonable share for that.  If we do not pay for it with taxes, what is your proposal for maintenance?

    1. Bill Marshall

      How much do you annually pay in sales tax?   What do others?  Seems you want others to pay for your and their amenities… disproportionally… BTW, I do not care if you answer.  I care about you thinking this thing through… I’m at the stage of life where acquisition (subject to sales tax) is de minimus…

      Sales tax is generally considered ‘regressive’… for good reasons… yet, all will benefit from stuff funded by that… famous IBM sign… “THINK”.

      I support continuance @ same level… I’d support/vote for it @ a higher level… as it affects me de minimus… but, am not inclined to take the risk of it going to $0.00.  That would be an additional $8.6 million hole.

      I hope the CC won’t go for an increase… if they do, will likely vote in favor, as the other choice is problematic…

  3. Matt Williams

    I am going to be interested to hear the City Manager and the Council discussion of this item on Tuesday.  The timing of this item appearing on a Council agenda is strange given the fact that the deadline for final language for the March election is not until November.

    The question the Vanguard asks is one of a number of things that should (possibly) be considered.

    The Finance and Budget Commission in its July meeting was very clear when it requested from the Finance Director a clear description of what the impact would be on the City Budget if extension of the 1% Supplemental Tax was not approved by the voters.  Understandably the Finance Director did not have those figures readily available in the meeting.  He is scheduled to bring that information back to FBC in a future meeting.

    FBC has expressed a strong belief that the voters need to know that impact is likely to be.  I say “likely” because there clearly will be some tradeoffs that need to be analyzed when evaluating employee and service reduction alternatives.  The estimates of annual lost revenues vary somewhat.  Numbers as low as $7 million and as high as $9 million have been mentioned.  The FY 2019-21 Budget currently projects $60.7 million of General Fund Revenue.  Losing $7 million of that means an 11.5% cut. Losing $9 million of that raises the cut to 14.0% cut.

    The Finance and Budget Commission in its June meeting made the following formal recommendation to Council.

    We formally request that Diane Parro, the Director of Community and Business Engagement, and her staff work closely with Nitish Sharma and this subcommittee to pull together a plan to produce communications on the city’s financial situation, to include an explanation of:

    ·      Pension costs,
    ·      Cost Containment activities,
    ·      The financial condition of our infrastructure, and
    ·      Organizational efficiencies measured against benchmarks,

    utilizing appropriate communication vehicles, for example mailers, by July 15th. The execution of this plan needs to happen well in advance of any Council consideration of a sales tax renewal vote in 2020.

    .
    It is clear from the presence of Item 07 on Tuesday’s Council Agenda that Council and the City Manager have chosen to ignor the FBC’s recommendation.  That is their right to do.  The FBC is only advisory.

    Why did FBC make the recommendation?  The reason is simple.  By law, municipal jurisdictions can not use public funds to campaign for a ballot measure; however, municipal jurisdictions can spend public funds to educate the members of their community about specific items/issues/challenges faced by the community.  The line between campaigning and education is not 100% crisp, but in simple terms, the switchover takes place when an election is actually declared.  So, the City can do lots of education for its constituents about “the state of the city” before the formal declaration of the election, but has to cease and desist doing that same education after the formal declaration.

    The FBC’s motion recognized that education needed to be done … and done soon, before the Council committed to the election.  The FBC’s logic was/is that the voting populace needs to understand the impact of $7-9 million on the current Budget.  The FBC saw that as important Education of the public, and that it was/is 100% appropriate to use public funds to achieve those educational goals.  Council’s consideration of Item 07 on Tuesday may mean that Educational opportunity is wholly and completely lost.  Hopefully the new City Attorney will give the City Manager and the Council good advice on how to optimally navigate through the provisions of the law.

    With that said, I find myself asking “What’s the rush? Why is it a good idea to be discussing specific ballot language in July when that language isn’t required until November?”

    Phil Coleman, did an excellent job of summing up the downside in his November 2018 comment

    “But the city and especially the council did not put on the full court press there either.  There was no robust complaint.  There was no door to door canvassing.  There was no making the case about the $8 to $10 million shortfall.”

    A united and mobilized Council would have certainly helped sell the need for a supplemental funding measure prior to a public vote. Several talking points could have been raised in support. The Finance Department could have prepared cost/revenue projections if directed to do so. The economy was improving, tax increases had been held in abeyance during the darker economic times, and the city revenue stream showed promise for the future.

    We can’t, however, cite just the Council for leadership failure. Other leadership components should have mobilized themselves and others to march in-step with our governing body. Where were the city employee unions, the community advocates demanding increased city services for particular needs, the department heads? All would directly benefit and yet their voice and presence during the campaign were notably lacking.

    Add to the three “no’s” in the above quote, there was no city leadership and initiative. They received in return exactly what they invested, nothing.

    .
    Individuals like Robb Davis worked very hard as individuals, and they should be honored for their effort, but individuals knocking on doors is nowhere near as effective as a coordinated Educational effort like the one we saw regarding the Water Treatment Plant … conducted by the City at various venues across the City … East, West, North, South and Central.

    JMO

     

    1. Ron Oertel

      Based upon the survey results, it seems that no “education” is needed for a straight-out renewal.

      The only question is whether or not it should be raised (e.g., to match Sacramento’s rate). It would be unfortunate if the city made the same mistake that the school district did, in shortchanging themselves. And then, almost immediately coming back for more. (That’s a recipe for rejection.)

      Regarding “taking a chance” – it’s ultimately up to voters to take responsibility for the outcome. There’s only so much hand-holding that can be accomplished, by officials.

      1. David Greenwald

        “Regarding “taking a chance” – it’s ultimately up to voters to take responsibility for the outcome. ”

        Couldn’t disagree more on this. The voters job is to determine whether or not what the council asks for is reasonable. The Council has a fiduciary responsibility to the city to maintain its fiscal integrity and therefore must be judicious and strategic in their asks.

        1. Ron Oertel

          “The voters job is to determine whether or not what the council asks for is reasonable.”

          The money isn’t going to the council.  It is the council’s job to initially determine what is reasonable, for the city.

          “The Council has a fiduciary responsibility to the city to maintain its fiscal integrity and therefore must be judicious and strategic in their asks.”

          Many have argued that the councils have not maintained “fiscal integrity”.  In fact, the fiscal status of the city (and cities/counties statewide) prove it.

          Is putting forth an amount that is less than needed “strategic”?

          It is up to voters to decide if more money is needed, and whether or not they trust it to be spent wisely.

        2. Ron Oertel

          Me:  “Regarding “taking a chance” – it’s ultimately up to voters to take responsibility for the outcome.”

          David:  “Couldn’t disagree more on this.”

          Well, the system itself is set-up to provide ultimate authority to voters.  Therefore, it doesn’t really matter if you agree, or disagree.  (Assuming that the council puts forth credible proposals.)

        3. Ron Oertel

          Voters are also responsible for the selection of officials who make initial decisions, regarding what’s “reasonable”.

          So, unless there’s a local “electoral college”, that outcome is also the responsibility of voters.

        4. Alan Miller

          It is the council’s job to initially determine what is reasonable, for the city.

          That’s very unicornian.

          Isn’t the council’s tactic to test the waters to best guess how much money they can ask for and get away with it?

        5. Ron Oertel

          Alan:  I generally don’t view the council as trying to “get away” with something.  Why would they, unless they had some ulterior motive? And, what would that be?

          Regardless, that’s a different issue than judgments regarding “reasonableness”.

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