DOWNTOWN — If you have plans to purchase an expensive 3-D television or a new hybrid vehicle, you might want to do it now or risk paying more next year.
That’s because the City Council on Tuesday voted unanimously to place on the November ballot a half-cent sales tax increase, with half of the proceeds most likely headed to the Santa Monica-Malibu Unified School District.
The increase is expected to generate $12 million annually, money city officials said will help off-set future budget deficits that could lead to significant cuts in essential city services, such as police, fire, after school programs and community maintenance. The projected deficits are the result of the worst economic recession since the Great Depression, with the state taking over $40 million from City Hall over the last six years, city officials said.
If approved by a simple majority of Santa Monica voters, the increase would push the city’s transaction and use tax to 10.25 percent, one of the highest in the state. The tax would not apply to food, medication and other items exempt from the current sales tax. The measure does not include an expiration date.
Not only will voters be asked to approve the tax, the council also placed on the ballot an advisory measure that would ask voters if they believe half of the estimated $12 million generated by the tax should be shared with the school district.
Education advocates, which included members of the business community, overwhelmingly supported the council’s decision, expressing an even greater need for funding following millions in cuts from the state and the failure of a local parcel tax, Measure A, which would have charged property owners $198 per parcel per year to generate $5.7 million annually for public schools. Property owners already pay $346 per year per parcel to help fund schools.
Measure A, which needed a two-thirds majority to pass, failed in May mainly because of a lack of support in Malibu, which ironically would benefit from the potential increase in school funding the sales tax measure could provide without having to give anything in return. The tax would not apply to Malibu, which partners with Santa Monica to run the district.
With more than 66 percent of Santa Monica voters coming in on the side of the schools, it is believed City Hall’s quest for cash will be easier this November as the tax measure requires a lower threshold for passage than the parcel tax, and it will receive the strong backing of the education community, which is sure to benefit from a yes vote. How much of a benefit is uncertain.
The council, which already gives the school district over $7 million annually as part of a joint-use agreement, would not be legally obligated to give the school district any money if the ballot measures are approved. City officials said the advisory measure will only gauge the community’s interest, allowing them to voice their spending priorities, and is not binding. If the sales tax measure set aside money specifically for schools or any other cause, that would trigger the two-thirds threshold for passage.
Councilwoman Gleam Davis, an active education advocate before sitting on the dais, felt it was imperative to put both measures before the voters because she feels the financial mess in Sacramento will not get better anytime soon, and could in fact get worse, putting pressure on local governments to do more with less while creating financial uncertainty.
“This community will not tolerate any significant cuts in services,” Davis said. “Santa Monica has such a tremendous tradition of providing high-quality public services. We can’t cost cut our way out of this problem. We certainly need to do some cost cutting, but the fact is you can only cut so much until you get to an unexceptable level of services.”
Members of the education community said the school board will not place on the November ballot a competing parcel tax measure to fund schools and will instead link its fate to City Hall’s. They pledged to use their resources to help pass the measure.
“This tax would make more sense and be easier to pass than a parcel tax,” said Neil Carrey, who heads the district’s parcel tax feasibility committee.
Mayor Bobby Shriver, who voted against placing the sales tax measure on the ballot two weeks ago, but changed his mind Tuesday, said he still believes that the school district would be better off going for its own tax and with a stronger campaign in Malibu the district could get the two-thirds vote it needs for approval. He said the district was “missing a chance,” to control its own destiny.
Shriver also said he does not want to see the campaign for the sales tax increase use scare tactics to intimidate voters. Shriver said City Hall is “rich” when compared to other municipalities that are being forced to make drastic cuts and lay off employees. The measure is meant to shore up future budget deficits that may arise from a struggling economy.
“The city is not broke,” he said. “When people vote they should have a clear view … . The schools are in a very different situation than the city. … I hope that the campaigns for this are straight forward about that.”
Shriver originally was opposed to the tax increase because he felt more could be done on the cost cutting side to bring about balanced budgets. He changed his vote because he agreed with his council colleagues that it should be left up to the voters to decide if the extra money is needed.
Shriver had support from Heal the Bay director Mark Gold, who has championed past tax measures that fund water treatment initiatives. Gold said he favored the school district going for another parcel tax because schools are in need. He didn’t feel the same way about City Hall.
“I really think this is not a very good idea at this time to go forward with a flat tax in this manner,” Gold said. “I have yet to see with all the things going on within the city of Santa Monica the urgent need for the city itself for this fee.”
Whether or not the tax increase will receive the support of the business community remains to be seen. The Santa Monica Chamber of Commerce is expected to meet with members, including car dealerships, to gauge their interest in an endorsement. Several high-ranking members have signaled their support for the measure as a way to protect public safety and education.
Former chamber chair and current member Tom Larmore, a land-use attorney and education advocate, said the advisory measure was important for him.
“That’s key for me, but I’m not in a business that will have to [pay much more because of the tax,]” he said. “For me, education is critical, but a lot of members don’t have a direct connection to the schools. People agree that good schools are good for business, but when it hits them in their pocket book, sometimes they don’t see it quite the same way.”
In a meeting with chamber leadership earlier this week, City Manager Rod Gould said research has shown that slight increases in the sales tax has little to no effect on spending habits.
He also tried to clarify a misconception that everyone who buys a car in Santa Monica would be subject to the tax. Gould said only those who register their new cars in Santa Monica would be subject to the tax. Those who register outside the city would not pay the increase. Also, large appliances and construction materials would be subject to the tax only if they are delivered to a location in Santa Monica.
While some feel that the tax could negatively impact consumer spending, Carrey said that the opposite could be true with more people willing to pay the extra tax to help the city’s schools.
kevinh@www.smdp.com
