Arroyo Grande wants to raise its sales tax by 1%. Here’s why
Arroyo Grande is putting the future of its infrastructure in the hands of voters this November.
On the ballot is Measure D-22, which proposes to increase the city’s local transactions and use tax, or, sales tax, by 1%.
The 1% sales tax hike “applies only to goods and services sold within Arroyo Grande, such as bars, restaurants, and retail stores like clothing and appliance stores,” the city said on its website.
Effectively, shoppers would pay one cent on every dollar spent at businesses in Arroyo Grande, not including groceries, doctors, dentists or legal services.
If a simple majority of voters passes Measure D-22, it will generate approximately $5.6 million a year for Arroyo Grande’s general fund, funding repairs for streets, sidewalks, potholes, drain systems and other infrastructure, the city said.
The proposed sales tax increase would begin on April 1, 2023, for a partial-year implementation in fiscal year 2023-2024 and full implementation in fiscal year 2024-2025.
Arroyo Grande: Funding needed for infrastructure repairs
The Arroyo Grande City Council voted unanimously to place Measure D-22 on the Nov. 8 ballot.
City officials say the funding that would be generated by the measure is desperately needed.
“The (funding) gap is so significant that we really we’ve not been able to identify any other sources (of funding),” city manager Whitney McDonald said.
Currently, Arroyo Grande has a 7.75% sales tax, which is slightly higher than the 7.25% statewide baseline rate.
Of the total tax, 6.25% goes to the state and San Luis Obispo County, while the remaining 1.5% goes to the city of Arroyo Grande.
This proposed tax increase would net Arroyo Grande a total of 2.5% of the sales tax.
Currently, Arroyo Grande’s 7.75% sales tax is the lowest sales tax rate of any city in San Luis Obispo County, McDonald said, tied only with Pismo Beach.
Increasing the sales tax would give Arroyo Grande “parity” with its neighbor cities, McDonald said, while providing enough funding to maintain the state of its roads.
According to Bill Robeson, Arroyo Grande assistant city manager and director of public works, the city currently spends $1.3 million annually on roads.
However, he said, Arroyo Grande will need around $6.25 million a year to maintain the current state of the streets, which the Pavement Condition Index currently rates at 56 out of 100.
In some places in Arroyo Grande, the PCI rating can fall to the 20s and 30s, which increases chances of vehicle damage and raises the costs of road repairs, McDonald said.
McDonald said voters have supported sales taxes before.
In 2006, voters passed Measure O-06, which raised sales taxes by 0.5%. That netted around $2.7 million annually for the city, though that funding goes directly into the General Fund.
“Even if we were to put all of that, in addition to our gas tax revenues for our streets, we wouldn’t be close to what we need,” McDonald said. “We’d be at roughly the half mark, and we’d be seeing our streets continue to decline.”
“The longer you wait and defer maintenance, the more expensive it is to do that repair in the future,” Robeson said.
Robeson said the increased funding would also allow the city to do more repair work in residential neighborhoods, which he said have fallen by the wayside as the city has focuses more of its attention on commercial streets
Chambers of Commerce, supervisor say tax hike is necessary
Kathy McCorry, CEO of the South County Chambers of Commerce, said road upkeep and repair is “of prime importance” to Arroyo Grande.
“In realty, no city can keep up with inflation right now without looking for additional revenue,” McCorry said. “The cost of maintenance and repairs is not exempt from the current state of inflation or increasing wages to complete the work.”
When the Chambers of Commerce surveyed surrounding cities that have already increased their sales taxes, McCorry said, those cities reported they did not see an adverse impact from the tax hikes.
By putting Measure D-22 on the ballot, Arroyo Grande is only keeping pace with the surrounding cities and their sales taxes, McCorry said.
The chamber CEO called the measure “a fair and equitable way to ensure we have the revenue to keep up” with Arroyo Grande’s neighbors, and said the tax increase is needed to retain the quality of life residents expect.
“Sales tax will be paid by visitors, and from those who live in surrounding communities but shop in Arroyo Grande,” McCorry said. “This actually lessens the burden on the residents of Arroyo Grande and broadens it to include those living elsewhere.”
Incoming San Luis Obispo County Supervisor Jimmy Paulding, who defeated District 4 incumbent Lynn Compton in July’s election, said he supports Measure D-22.
“Without the revenue from this measure, we do not have enough funding to maintain our streets, sidewalks, stormwater systems and other infrastructure in our community,” Paulding wrote in a recent email newsletter to his supporters.
Paulding said Measure D-22 will “close the gap” between funding to maintain Arroyo Grande’s streets, adding that maintenance costs will double and triple over the next decade without an immediate investment.
“To me, this is a quality-of-life issue for our community, and we are a community worth investing in,” Paulding said. “It’s about our roads and infrastructure, and the cost of investing in our community now or later.”
This story was originally published October 19, 2022 at 1:09 PM.
