Sensing the possibility that a new tax measure would not pass if placed on the ballot this year, the San Luis Obispo City Council decided to delay the initiative, as city officials spend more time pitching the tax hike to the public.
On top of the city’s existing .5 percent sales tax, San Luis Obispo officials are pushing the idea of a 1 percent sales tax measure. The tax hike is intended to fund infrastructure projects that require more than $400 million in fresh capital.
City officials have also floated the idea of raising property taxes, though the proposal does not appear to have as much momentum as a sales tax initiative.
Currently, San Luis Obispo has a 7.75 percent sales tax rate, the same rate as the other six cities in SLO County, each of which have also adopted half-cent sales taxes. Raising San Luis Obispo’s sales tax a full percent would bring it to 8.75 percent, or 1.5 percent above the state of California rate of 7.25 percent that also exists in unincorporated areas of SLO County.
According to a recent survey of San Luis Obispo voters, 57 percent support a one percent sales tax increase to improve city infrastructure, while 40 percent oppose it. However, only 29 percent of those surveyed said they would definitely vote yes on the measure.
Polling firm FM3 conducted the survey on behalf of the city. FM3 surveyed 846 city voters and found that 40 percent of voters oppose the tax measure, indicating strong opposition to the initiative.
On Tuesday, the San Luis Obispo City Council opted to withhold placing the tax hike on the Nov. 2018 ballot and instead aim toward sending the initiative to voters in 2020. Only Councilman Dan Rivoire supported placing the tax measure on the ballot this year.
Despite officials conducting an intensive public outreach campaign, support for a tax measure is currently too low, the city said in a press release.
“In addition to meeting directly with community members and stakeholder groups, city staff engaged a firm to complete a statistical survey of residents’ preferences on identified projects and various community members responded, with support for a special tax measure falling short of the threshold needed,” Public Works Director Daryl Grigsby said in a statement.
While the city stresses the proposed tax increase is for infrastructure projects, such as renovating the police station and building the Prado Road overpass, the initiative comes at a time in which the city is facing an approximately $9 million budget deficit over the next three years, largely due to rising pension costs.
San Luis Obispo currently has an unfunded pension liability of about $150 million, a figure that could be estimated at nearly $190 million when factoring in a city side fund and upcoming reductions in the state retirement system’s discount rate.
Critics have alleged in the past that the city has used half-cent sales tax money to backfill salary and pension costs. As a general purpose tax, Measure G generates revenue that can be spent on any expenditure within the city’s general fund.
The same would be the case for the 1 percent sales tax initiative the city is currently pushing. Elsewhere in California, allegations have also arisen that cities are currently packaging tax hikes to fund pensions as measures intended to pay for police and fire protection and other services.