My View: Why Would the Council Not Even Consider a Sales Tax Increase?

While the council did not take any action on Tuesday, as  Mayor Brett Lee noted, “We are not formally saying anything specific to the language,” nor were they “formally placing anything on the March ballot,” the council made their intentions clear.

The ballot language calls for “extending the existing one percent sales tax with no increase to the current rate,” and notes that it provides $8.6 million or so annually.

It also states that it would be in effect “until repealed by the voters,” and further noted that “all funds (stay) local)” and would fund city services like police, fire, recreation programs, roads, sidewalks, bike paths, and other services.

Dan Carson noted that the council “doesn’t over-promise” in the language – there is “northing here about 50-meter pools.”

One of the important issues for him was “the duration of the tax.”  Councilmember Carson stated, “I support the ongoing permanent approval that that language calls for.”

He noted, “We have 20-year fiscal projections that show we need this money for the next 20 years and it’s silly to me to pretend otherwise.”

While he saw some value in having periodic sunsets to maintain accountability, on the other hand, he noted that last spring there was a statewide measure sponsored by the beverage industry that would have required two-thirds votes to approve new tax measures.  When this measure passed in 2014, it passed with 57 percent of the vote.

When the roads parcel tax failed in June 2018, it received the same 57 percent of the vote.  The reason that the sales tax passed and the parcel tax failed had to do with the difference in voting requirements.

By making this permanent, the city can ensure that a majority is required rather than a supermajority into the future.

Let me state that I agree completely with Dan Carson here.  First of all, I have always cringed at the idea of “temporary tax increases” – while I understand that the tax increases sunset, they can also be renewed at the voter’s behest.  And in a place like Davis, it is highly unlikely that voters will strike down a tax measure renewal unless the times are truly extraordinary.

Moreover, if the city is going to need that money for the foreseeable future, let’s call a spade a spade and say so.  If the voters vote that down – then the city can go back to the drawing board.  But the polling shows it is highly unlikely that the voters will vote this down.

This allows the city to plan into the future – again, pending voter approval – and that the $8.6 million will remain on the books.

While I am supportive of making the measure permanent, what I really do not understand is why the council stopped there.  We don’t just need $8.6 million – we need another $8 to $10 million annual to plug the funding gaps.

And yet – nothing.  Not a word.  Not a question.  Nothing from the council.

Will Arnold: “I really like the language.”  He added, “I would be reticent about changing the language.”

Lucas Frerichs: “The language makes sense.”

Last Sunday we argued that, given the polling showing renewal support at between 71 and 77 percent and given the city’s fiscal concerns, why not at least consider the possibility of increasing it to 1.5 percent?

No one even entertained the idea.  They are risk-averse – they want to be sure to pass the renewal because the city will be hurting without that $8.6 million in tax money.

But given the margins of support for renewal, the risk does not seem very high.

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.

They did not poll people’s preference for a half-cent increase, but the numbers for renewal are overwhelming.  The initial support they have is 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.

It seems to me that if you have that big a margin, and remain in a fiscal hole after passing the measure, you should at least consider whether voters would support a bit more to actually close up that gap.  I’m disappointed that the council did not even want to consider that possibility.

—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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  1. Bill Marshall

    If the CC considers passing a measure increasing the tax, they should place a sibling measure to just maintain… if they both pass, the one having the most votes would apply, the other becoming moot.

    Less risk….

    1. Bill Marshall

      Actually, not me… but status quo works for me…

      Part of me suspects those who SAY we should go for more, actually want the existing to go away… subterfuge… kinda like the district election demand… I may be wrong, but don’t think so…

    2. Ron Oertel

      I’m not sure if it’s “good” or “bad”, but it’s similar to the reason that the city is pushing commercial development, as well.  (That is, the city is hoping to make a net fiscal profit.)

      Of course, the fiscal profit from commercial development could theoretically be increased as well, if the sales tax rate was increased.

      No one has yet actually addressed why either of these “solutions” are now needed, and yet were not needed a few years ago.  I’m “guessing” that it has something to do with costs rising faster than revenues (which are limited by Proposition 13), which is something that most cities and counties across California are facing.

      But certainly, sales tax is one of the least-painful methods of raising more funds.  (Unless one cares about how much Mori Seiki’s customers pay in sales tax, for example.)

      And hey – isn’t the “privilege” of doing business in Davis at least as valuable as doing business in Sacramento? 😉

      1. Bill Marshall

        But certainly, sales tax is one of the least-painful methods of raising more funds.

        Sales tax is one of the most regressive taxes, Ron… and I think you know that…

        1. David Greenwald

          While that is true, raising the sales tax is a very minor hit. We would be talking about half a cent on the dollar. $5 for every $1000 you spent.

    3. Ron Oertel

      Bill: “Part of me suspects those who SAY we should go for more, actually want the existing to go away… “

      Just to be clear, I would not fall into that category.  I actually do think that the city should raise its sales tax rate, and should put forth another parcel tax proposal, as well.

      Regarding “regressiveness”, do you think that Mori Seiki’s customers are “struggling”? How about those purchasing new cars?

      How much in sales tax actually comes from those who are struggling, locally? Do you really think a few cents more will put those folks over-the-edge? Are they purchasing that much stuff – especially locally?

  2. Ron Oertel

    The primary reason that I’d suggest raising the sales tax rate to match Sacramento’s is that it only requires a majority vote, unlike parcel taxes.  And, there’s already strong support for the existing tax.

    I’d trust the majority, to make the right decision. And frankly, let them live with the consequences – either way.

    Nothing is “irreversible”, in the long run. Why do voters have to be “protected” from themselves?

    1. Ron Oertel

      I’m also wondering why some city officials seem to actively advocate for development “solutions”, but not a peep out of them regarding this low-hanging fruit. Not even CONSIDERING it, apparently.

      Also, what if their development dreams fail – at the ballot box, or in actual performance?  (Unlike a sales tax increase, one would not find out about the latter until years – or even decades afterward. And even then, the answer might not be clear – or even analyzed at that point.)

      As some like to ask on here, what is their “backup plan”?

      1. Ron Oertel

        It’s also probably no surprise that some of the usual development activists on here (who are “oh-so-concerned” about the city’s fiscal challenges) are silent, regarding this issue.

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