Council members say no to sales tax increase without pension cuts

City Council members discussed a proposed increase to the sales tax of one-quarter to one-half percent on Thursday – but said the measure won’t make it to the ballot unless the city and labor unions come to some agreement about pension cuts first.

“We need to demonstrate to our constituents that we have undergone pension reform,” City Councilman Rob Fong said. “It would not be responsible of us to go out and ask for more money from our citizens, if we’re not taking care of business on the cost side from a structural standpoint.”

Councilman Kevin McCarty said he agrees with Fong.

“Voters should go to the polls saying, ‘You’ve done everything on your end, Sacramento, before you asked me for more money,’ ” McCarty said.

Former mayoral candidate and city Parks and Recreation Commission Chairman Jonathan Rewers, who proposed the tax increase in May as a way to generate a revenue and restore city services, spoke in favor of the proposal.

“I am in agreement with the staff report that a general sales tax makes the most sense for voters,” Rewers told the council Thursday.

Mayor Kevin Johnson did not comment on the topic during the council meeting, but he told the Sacramento Bee in May that he would not be inclined to support a sales tax.

Rewers told the council that one concern with a general sales tax is not knowing how the money will be used, so any discussion of a tax increase should include a general spending plan for the revenue.

But at least one person in the audience had a different take on the idea.

“These things never come to the public,” local businessman Mac Worthy said after the council meeting. “We’re never invited to those discussions.”

Worthy opposed the suggestion of creating a preliminary spending plan as unrealistic because, with a July 24 deadline to get a measure on the November ballot, the city would not have time to allow public town hall meetings to fully vet it with voters.

According to the city staff report, a quarter-cent tax increase would potentially bring the city an additional $13.5 million in revenue. A half-percent increase would bring roughly $27 million.

State law allows cities to increase their individual tax rate by up to 2 percent over the state tax base – which is currently 7.25 percent – up to a maximum of 9.25 percent.

Sacramento’s current sales tax rate is 7.75 percent. That is the rate for all cities in Sacramento County except Galt which has a sales tax rate of 8.25 percent. In nearby Placer county, the sales tax rate is 7.25 percent, and in Yolo county sales tax rates range from 7.25 to 8.0 percent.

Other tax increases on the horizon include a half-cent sales tax increase being promoted at the state level by Gov. Jerry Brown’s office and a possible increase in transportation taxes – called “Measure A” – that is being vetted at the county level.

“I think this is an interesting idea, but I just don’t want the potential outcome of a possible Measure A (transportation) tax increase being hurt in any way,” said Sacramento resident Mike Barnbaum during public comment on the item.

The Measure A tax funds local roadway and transportation projects, and can be increased with voter approval.

In a recent Sacramento Press poll asking for readers’ opinion on the proposed sales tax increase, more than 56 percent of respondents said they would not vote for it and 27 percent said they would. Another 17 percent of respondents said their vote would depend on how the tax revenue was spent.

Melissa Corker is a staff reporter for The Sacramento Press. Follow her on Facebook and on Twitter @MelissaCorker.

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June 8, 2012 | 2:02 PM

Interesting that the city staff report assumes that consumer behavior is completely inelastic in response to increased sales taxes. (i.e. 1/4% will raise $13.5M while a 1/2% increase raises $27M).

Consumers will not leave the city limits to save a penny on a gallon of milk. But a 1/2% tax increase really ads up for buyers of fleet vehicles and large purchasers of building supplies and the like.

Let’s be honest and recognize that increased sales taxes will drive a certain amount of business out of the city.

June 8, 2012 | 2:29 PM

Milk isn’t taxed but your larger point is spot on so long as other cities in the region do not raise their taxes. And there are some indications that at least some other cities may be thinking about raising taxes. Look at Foresthill. Very conservative city in conservative Placer County. They voted to raise their water rates:

My point is that if this trend continues, while Sacramento would be marginally more competitive if we don’t raise the sales tax, it’s possible that raising it might not hurt us as much as some believe.

June 8, 2012 | 2:42 PM

If sales tax bumps up with Brown’s initiative, Measure A, a City and other increases circulating out there, and our rate hits 9%, it maybe time to invest in Reno.

June 8, 2012 | 3:22 PM

I just wish sales taxes weren’t so regressive.

June 8, 2012 | 5:10 PM

Do you think we need a city income tax, then, or other progressive tax?

June 8, 2012 | 11:26 PM

I would like it better if we raised the property tax. Reason being that IMO as a homeowner I benefit more from well-maintained parks than a renter does. Reason being that the parks raise house values as well as be a place where people can get together. So, if I am getting more benefit from well maintained parks, should I not also pay more?

June 8, 2012 | 11:42 PM

I think Prop. 13 prevents that.

June 11, 2012 | 9:21 PM

That can’t be right. When we bought our house we signed Title papers saying we would pay the property tax set by Prop 13 and then a whole host of surcharges: I remember one for the American River College in particular because while I supported that I didn’t realize we were in its catchment area so I asked. Why couldn’t we do something like that?

June 8, 2012 | 9:51 PM

If the Council wants more revenue how about fast tracking instead of micro-managing as much market rate housing as possible. The increase in property taxes could more than match what they expect from this proposal.
Makes little sense to be raising the sales tax when the issue is you don’t have any customers because the city bends over every time a neighborhood group tries to stop every development. New residents = new customers = more sale taxes. In fact I wonder how many tens of millions the city has lost in property and sales taxes..while they let the nimby’s in Curtis Park stall and almost kill the Taylor project. Maybe if they hadn’t fought the developer trying to bankrupt him into submission, they city would be realizing additional revenue that could be used to maintain parks.. for example like Curtis Park…

June 8, 2012 | 11:42 PM

What Taylor project in Curtis Park?

June 9, 2012 | 9:38 AM

The city council approved the spending of $90K in December 2010 to hire an engineer to design a city-wide property tax assessment district to fund park maintenance. They were warned that such a tax proposal could not pass legal muster under Prop. 218 and would be impractical to implement due to technical legal limitations. After blowing about $60K on the engineer, the enigneer came to the same conclusions.

The $30K left over from the $90K original authorization was retasked by the city manager to commission an opinion survey to measure voter appetitie for various types of tax hikes. The poll was flawed in a number of respects: (1) bad sampling (i.e. asking voters to self-identify themselves as likely voters instead of relying on actual voting history) ; (2) extensive use of push poll questions; (3) use of weak counterarguments; and (3) some highly anomolous results (i.e. the survey found higher support for a $29 parcel tax than a $19 parcel tax).

Everyone was shocked at the survey’s findings: big support for tax hikes of every kind and every amount. But since the poll was so seriously flawed, the council would be making a major mistake in relying upon it as a predictor of likely voter action in November. The arguments against a city sales tax hike are compelling and easy to convey (the compounding effect of a proposed hike in the state sales tax, double digit, multi-year utility rate hikes, damage to business competitiveness, harm to struggling residents, failure to control runaway city labor costs, lack of trust in city government, etc.)

A national survey issued last week reported that Sacramento places dead last among 40 cities surveyed in friendliness to small business. The council should focus on improving our business climate and putting the city’s finances in order. An improved business climate and a stronger local economy will generate higher local tax revenues without rate hikes. Cannibalizing our economy, our businesses and our residents now thru a sales tax hike is terrible public policy.

The council might want to also read today’s Bee and note the rapidly fading support for Brown’s income and sales tax hikes.

June 10, 2012 | 12:16 AM

Did you pick apart the national survey’s methodology as closely as you picked apart the local survey’s methodology – or was it just that you didn’t like the local survey results?

June 11, 2012 | 8:33 AM

The survey also used terms like ‘revenue measure’ in place of the more honest, yet charged, ‘tax increase’, among other issues, deliberately softening the blow of what would actually occur if such an increase was imposed by the city council.

Another thing that piqued my concern was Rewers’ discussion at council where he made the assertion that “I know Maslin, and he should be trusted” or words to that effect. In light of last summer’s Maslin survey whitewashing the Railyards arena public support, where virtually none existed, given the 2006 vote on the matter which was a resounding defeat for Railyards arena advocates, despite the measure’s sales tax basis, it still benchmarked public sentiment against the project in general, consistent with other polling then and now, which Maslin’s deliberately deceptive methods ran counter to, as revealed in their presentation to council, calling into question the present survey on a broader sales tax increase to support city services…

It seems that when an engineered outcomes is needed, call Maslin…

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