Facing budget gaps, SLO Council puts new sales tax measure to November voters
The San Luis Obispo City Council unanimously approved putting a proposed sales tax measure on the November ballot to let voters decide whether to increase the existing sales tax rate by 1 cent and extend a half-cent tax — totaling a 1.5% city sales tax rate.
The city’s current sales tax is 7.75 cents, meaning the new tax would go up to 8.75 cents.
The existing half-cent tax, established in 2014, is set to expire in 2023.
The proposed new tax, if approved, would be indefinite, with language on the measure stating it would be “until ended by voters.”
The increase would generate $21.6 million annually for the city.
San Luis Obispo Council members and staff cited crippling the economic impacts of the coronavirus pandemic.
“Over the world has faced a health and fiscal crisis brought on by the COVID-19 pandemic that lead to a ‘shelter at home’ and other mandates that have significantly reduced most economic activity,” the city wrote in a staff report. “For most of that time, all but essential businesses have remained closed. The impacts to businesses and the community is unprecedented.”
The city is facing an projected $8.6 million shortfall in 2020-2021 due to coronavirus economic impacts, with anticipated impacts to future years as well.
Each of the other six San Luis Obispo County cities currently have a 7.75-cent sales tax: Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Pismo Beach and Paso Robles.
According to a San Luis Obispo city staff report, the average sales tax rate for cities in California is 8.66% and several other cities have higher rates — such as Santa Cruz and Palm Springs, which each have 9.25% sales taxes. Santa Barbara and Santa Maria have 8.75% sales tax rates.
“What we heard coming back from the community is it’s is not extravagant,” City Council member Andy Pease said Tuesday. “I feel like what we’re saying is that we want to maintain this great quality of life, and we want to move forward with a bright future we know we can achieve with the improvements and priorities moving forward.”
The proposed ballot measure proposed spending the funds on:
▪ Long-term financial stability;
▪ Maintaining fire, public safety, health emergency and disaster preparedness response;
▪ Addressing homelessness;
▪ Keeping public areas clean and safe;
▪ Helping local businesses;
▪ Repairing streets;
▪ Protecting creeks from pollution and
▪ Maintaining youth and senior services, open space, parks and other general services.
SLO survey shows support forsales tax increase
The city cited a “statistically valid survey” taken in June 2020 that resulted in 71% percent support for a total 1.5-cent tax, compared with 63% support of a similar survey taken in September 2019.
The city also has posted a current online community survey showing that, between June 1 and June 17, the top public priorities for spending included keeping public areas safe and clean; protecting long term fiscal stability and preserving open space and natural areas.
A previous survey conducted between Dec. 27, 2019 and April 15, 2020, similarly showed the top three priorities among respondents as addressing homelessness, keeping public areas safe and clean and preserving open space and natural areas.
While many who responded online suggested ways the new tax money could help in areas such as the environment, homelessness and cycling on city streets, opponents advocated for “NO MORE taxes and fees on local businesses” and said “water bills are extremely high, keep costs down.”
Together, the online surveys generated responses from more than 1,000 people.
The city said that studies have shown that about 70% sales tax revenue is generated through purchases from people who live outside San Luis Obispo limits.
“Having talked with so many small business owners over the last few weeks in particular, it’s so important to keep funding to retain what’s essential to our community,” San Luis Obispo Mayor Heidi Harmon said. “I’m super hopeful this moves forward and the community supports it as it looks like they’re ready to do.”
“We want to continue to not only recover, but make improvements, as a city, as a downtown and as a business,” Laura Mullen, Downtown SLO’s vice president of the board of directors, wrote in a letter to the city.
City previously contemplated sales tax measure
The city considered a sales tax measure in 2018 to help support infrastructure costs that couldn’t be covered by existing San Luis Obispo revenues.
But the council at the time delayed putting a measure on the ballot to help best identify city needs and gather more information to present to the public about priority spending.
“With the economic impacts of COVID-19 on city revenues continuing to be analyzed, staff will be returning to the City Council with an updated, long-term financial outlook and potentially additional service and capital project reductions in October 2020,” city officials said in a staff report.
The staff report added that “the impacts of COVID-19 on city revenues,” including the existing half-cent tax, increases the importance the initiative for the one-cent increase “with a focus on investment and economic recovery.”
This story was originally published July 21, 2020 at 9:00 PM.
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