By David M. Greenwald
Executive Editor
Davis, CA – For over a year now, the Davis City Council has prioritized the need for a revenue measure in November. While they have considered the array of options, given their desire to make the revenue measure a 50 percent vote rather than a supermajority (two-thirds), the council will likely decide between a Utility User Tax and another sales tax increase.
Staff is recommending a one percent sales tax increase.
Staff notes, “The City Council has long wrestled with balancing the costs of required and desired programs and services, necessary infrastructure, growth and development to suit the nterests of the community, and revenue to pay for these programs, services and infrastructure.”
Staff adds that the city is still rebounding from the COVID pandemic while, at the same time, costs for goods and services have increased quickly.
Staff explains, “Post-pandemic construction costs have repeatedly exceeded original estimates, with increases across California growing at a rate of 9% year over year, making it increasingly difficult for the City, through no fault of its own, to budget for and successfully bid capital improvement projects.”
They also cited energy costs which have spiked.
They noted, “Utility costs, specifically gas and electric costs through PG&E have increased to the tune of $1 million dollars in the current budget year, a cost increase beyond the City’s control and with no increase in service delivery.”
In the current fiscal year, “staff has presented a budget with a General Fund reserve of 7.5%, half of the target level of 15%, along with over $3.5 million in General Fund deferrals or one-time reductions.”
They warn that these reductions are a short-term bridge, and “are not viable in the longer term.”
Options for cities are limited in order to generate revenue beyond existing funding that comes through the state and county.
If the city hopes to pass a measure with a simple majority, then council and ultimately the voters must approve a general tax—one where the revenues can be used for any general government purpose.
Staff notes: “The first priority would be to ensure that existing programs and services continue. Second priority includes shoring up the General Fund reserve and funding deferred capital projects/equipment replacement/liabilities. The third priority is to allocate funds to new programs/services and/or enhance existing services based on Council priorities.”
They add, “A small reserve makes it challenging to respond quickly to unexpected emergencies or needs. Assuming typical inflationary growth, both in revenues and expenditures, and no other major changes in spending levels, the reserve could be restored to 15% within two fiscal years. Or council could choose to restore the reserve more slowly, so that a greater proportion of any new revenue funded other priorities.”
According to polling conducted in November, a majority of voters recognize the City’s need for additional funding and are willing to increase taxes to maintain services.
Affordable housing, homelessness, and crime/public safety are top-of-mind issues for voters as the most important problems facing the community.
As of the time of the survey, support for a potential measure was above the necessary threshold.
Maintaining public safety response, roads and bike paths are top tier priorities for voters.
The City currently has “a local transaction and use tax of 1%, and has the ability to increase the tax by another 1%.”
Staff recommends “the Council direct staff to prepare an ordinance and accompanying resolution to increase the existing sales tax from 1% to 2%, for a total sales tax rate of 9.25%.”
Such a tax would generate around $11 million initially.
Staff notes, “Apprehension about a possible sales tax ballot measure included concern that an increase would be too high and make Davis uncompetitive with neighboring jurisdictions.”
However, they point out that “other communities in the region have sales tax amounts comparable to Davis, and some are also planning on sale tax measures in November.”
West Sacramento is at 8.25% and recently took action to place a ballot measure in November to increase that by 1%. Woodland is at 8% and is discussing a sales tax increase for November. Folsom, through a citizens’ initiative, will be putting a sales tax increase measure on the ballot.
In addition, they point out, “Most Bay Area communities are already over 9%.”
If the City Council agrees with the staff and subcommittee recommendation to place a general sales tax measure on the November 2024 ballot to increase sales tax by 1%, then the council can direct staff and the City Attorney to return at the June 18, 2024, city council meeting for approval to place the matter on the ballot for November.
Goodbye Davis shopping, hello Woodland. An increased sales tax will discourage local shopping and will certainly not entice new tax generating retail from setting up shop in town. We have 2 large empty spaces in South Davis, OfficeMax and Rite Aid. An extra 1% isn’t much on a bag of chips, but substantial on a bag of groceries. To me, the sales tax increase sounds counterproductive
Woodland is doing the same thing
One reason they settled on the sales tax, is pretty much everyone is going to be in the same range. Now if you want to argue you’ll be shopping in Woodland because Davis doesn’t have enough retail, you have a point.
First, silly me. I used potato chips and groceries in my post. Oops, non-taxable items. Point being an extra 1% on taxable goods adds up. I’m not per se against the idea of taxation, but sales taxes are regressive and unequally affect the poor. You are spot on about our towns dwindling retail space. Taxing goods that are increasingly unavailable in the City of Davis may not generate the anticipated revenue. I will keep buying local as much as possible, but I’m able to afford to. Over 44 years I’ve likely spent around $100 per month at Davis Ace.
So at $100 a month, you are spending an extra $1 each month on sales tax.
Over 44 years, you would spend an additional $512 over those 44 years. That’s not much up to add.
Moreover, if you drive to Woodland instead, you could easily spend an extra $5 or $10 each month just on gas. So you are still coming out ahead by shopping in Davis.
The math is not on your side.
I try to limit my Woodland trips to Costco and occasionally Home Depot . I do my Best, but no lumber store since Hibbert Closed, no comprehensive office supply store since Office Max left. Heck, without Target you couldn’t buy socks and underwear in town. I don’t “like” being forced to shop out of town, what is one to do if you want to shop a variety of electronics, appliances or clothing? A 2% tax on me will only double what you point out is my paltry contribution.