Council reviews sales tax option to help balance budget
The city council is laying the foundation for a possible sales and use tax ballot measure this November.
The council heard a pitch from city staff—including interim Assistant City Manager Chris Paulson, Finance Director Adam Pirrie and Public Information Officer Bevin Handel—about the need for a .75 percent (or three-quarters of a cent) sales and use tax increase to cover a rising deficit.
The number comes from a report by the Future Financial Opportunities Committee (FFOC), a citizen panel convened in June 2018 by former mayor Opanyi Nasiali to look for ways to increase funds in the city. The committee concluded at the April 9 council meeting that a sales tax would be the way to go.
The city says that a .75 percent sales tax increase would generate approximately $2.5 million for the city, which they say is needed to maintain current levels of service.
“This is not to expand, this is to maintain,” Mr. Paulson said. He later noted the increase would be “almost a silver bullet” for the city’s financial woes.
The city’s current sales tax rate is 9.5 percent, and would reach the state-mandated cap of 10.25 percent if the measure passes. Unlike a special use tax such as Measure SC, where a two-thirds supermajority would be needed to pass, a sales tax increase would only need a simple majority from voters.
According to Mr. Pirrie, the city is facing a structural deficit of up to $2.8 million by 2023. More recently, the city said it has made over $1 million in cuts to balance this year’s budget so far, which will be presented to the council on June 11.
Reasons for these deficits, Mr. Pirrie said, include rising personnel and pension costs—including changes in CalPERS that increased the city’s unfunded liability—insurance, utility and contract costs.
Over time, some examples Mr. Pirrie provided of services that could be cut to balance future budgets include tree maintenance, police services, Village maintenance, community-based organization and homeless funding and the Youth Activity Center and Teen Activity Center.
“These examples are not all inclusive, but are simply to illustrate the types of services that may be considered in the discussions of service reductions in the event that sources of revenue cannot be identified,” Mr. Pirrie said.
Mr. Paulson noted that a sales tax would generate revenue for the city from visitors and resident alike, since Claremont is a destination town for the region.
Another reason to approve a sales tax increase, he said, is local control—keeping the money within Claremont before the county comes in with another measure.
Currently, Mr. Paulson said, the city receives one percent of the total 9.5 percent tax rate—equivalent to $4.5 million per year. The state receives 6.25 percent and the rest goes to various countywide ballot measures, including Measure M, which in part pays for the Gold Line extension, and Measure H, which pays for countywide homeless services.
Mr. Paulson stressed that Claremont hasn’t yet received the benefit of those two measures—it remains up in the air whether the Gold Line will ever reach Claremont, and the city has struggled in getting Measure H money to fund local homeless initiatives.
If Claremont doesn’t keep the .75 percent increase under local control, he said, the county could increase the city’s tax rate with another measure in the future.
“If it’s not us, then who?” Mr. Paulson asked.
To get the ball rolling on placing a measure on the November ballot, the council has to approve a number of resolutions, including declaring a fiscal emergency.
During public comment, planning commission chair Richard Rosenbluth spoke in favor of the tax, saying it presented “a very clear way to meet our structural deficit” and suggested part of the money could be used to pay down the city’s massive CalPERS unfunded liability.
Rachel Forester urged the council to adopt the same formula the Claremont Unified School District used to get residents on board with Measure G—including holding dozens of community meetings before the measure was placed on the ballot and dozens of meetings after.
“Let’s do it like that,” she said. “Let’s get it done right, so that we can fund these really, really important things.”
Ludd Trozpek urged caution because a sales tax measure could not quite be a slam-dunk for the city.
“If this is put on the ballot, I doubt it would be as easy to pass as some of you might think,” he said.
Mayor Pro Tem Larry Schroeder reiterated the warning that another agency could bring Claremont’s sales tax rate to the state cap if the city didn’t act.
“If another taxing agency gets in there ahead of us and they get it passed, we will be locked out of this resource, and we will still be stuck with this structural deficit,” Mr. Schroeder said.
Councilmember Jennifer Stark said the sales tax, if passed, would not be a “windfall” for the city.
“This is a responsible use of an option that’s available to us to maintain the quality of the town that we live in,” she said.
The city will come back with the declaration of a fiscal emergency around the same time the 2019-2020 budget gets presented on June 11, City Manager Tara Schultz said. An ordinance calling for the special election in November would need to be passed by at least a four-fifths vote by the end of July.
City opposes SB50, offers suggestions
The city sent a letter to California State Senator Scott Wiener opposing his housing bill, SB50, as it is currently written.
SB50 aims to increase housing density around public transit to jumpstart solving the state’s affordable housing crisis. Local cities have condemned the measure, saying it would strip local control over zoning and city development.
In the letter sent May 15 and written by Mayor Corey Calaycay, the city opposed the measure, but “[agreed] with the fundamental problem—there are not enough homes being built in California.”
The council opposes the bill for a number of reasons, including its “random exemptions” for coastal communities, undermining local general plans and housing elements, and allowing developers to override building height limitations, density, housing requirements and limiting design review standards.
The letter, however, offers housing legislation it does support, including incentives to develop or renovate existing units, an across-the-board exemption for cities with a population of 50,000 people or below from a high-density mandate, bills that don’t show favoritism to developers, and a respect for a community’s cultural and historic elements.
“SB50 overrides local control; however, our city council is dedicated to incorporating the spirit and intent of your legislation into an amended proposal that fits our community,” the letter stated.
The letter was agreed upon during Tuesday night’s city council meeting, following a lengthy discussion.
But it appears a vote on the measure will have to wait. On Thursday, State Senate Appropriations Committee Chair Anthony Portantino, whose district includes Claremont, took SB50 off the table for the year, according to Liam Dillon of the Los Angeles Times. The bill will be up for discussion again in 2020.
The next city council meeting will take place on May 28.