Proposal to seek sales tax increase meets with council resistance in Escondido

A recommendation from the city’s finance team to seek voter approval next year for a half-cent sales tax increase met with a cool reception from the Escondido City Council recently.

The increase, which would up the sales tax collected in the city from 7.75 percent to 8.25 percent, would raise a projected $13.8 million annually, money that could insure vital city services such as police, fire and public works are not cut, city staff said.

Escondido, like many California cities, is facing massive escalations in debt associated with unfunded pension liability costs in the years to come. Increasing the sales tax would generate the kind of annual income that will be needed, the council was told during a budget workshop Wednesday evening.

“The benefit from a sales tax increase is that how and where funds are spent would be controlled locally,” said Joan Ryan, the city’s assistant finance manager. “This will insure that the city has enough police officers and firefighters to respond to 911 emergency, that we have the funding to repair pot holes and maintain our local streets, and that public areas are free and clean of graffiti.”

Added Assistant City Manager Jay Petrek: “This is intended to be one of the many facets we would pull together to preserve the services provided to the community they are currently enjoying to make sure there is no reduction in those services.”

Such a tax increase vote would take place during the November 2020 general election. The council does not need to decide whether to seek approval for the tax increase for another year.

They were told that other local cities have taken such action in recent years including Oceanside in 2018. Escondido has never asked voters for a sales tax increase. For comparison, the council was told that while the city’s tax is currently 7.75 percent, other cites such as Oceanside, Vista and El Cajon are currently at the suggested 8.25 rate. Other cities are even higher including Del Mar, Chula Vista and National City (8.75) and La Mesa (8.50).

But several members of the council indicated Wednesday they were far from convinced it was the way to go.

“I think we are very far from a tax rate increase,” said Mayor Paul McNamara. “I think we need to have a real scrub of the budget first ... and we need a methodology that fixes the problem.”

Councilwoman Olga Diaz said she’s not a fan of raising taxes until she is sure no other options are available. “I don’t think we are at that point yet,” she said. “I don’t want to go straight into ‘let’s raise taxes’ to solve our problem until I am convinced that we’ve cut everything.”

She and others also said they wanted to see detailed projections of how a tax increase would play out over the next 20 years. Would it really solve the pension liability issue, they asked?

“My simple math is that if we do this sales tax thing we’re still going to be in the same boat in five or seven years,” said Councilman John Masson. “We haven’t really fixed the problem, which is this gargantuan unfunded liability that we are being forced into ponying up the cash earlier for.”

The sales tax increase issue will be addressed in the coming months. The issue came up during the budget workshop as city staff looked to the long-term future. The majority of the council’s comments centered around the sales tax issue and less on the proposed coming year’s $110 million balanced budget, which is scheduled to be voted on by the council next month.

The proposed Fiscal Year 2019/20 General Fund revenue estimate is $105.4 million which is 3 percent higher, or $2.7 million, over the 2018/19 amended revenue projection.

“Over the past several years, the revenue side of the equation, heavily dependent on sales tax and the economy, has generally maintained pace,” the council was told in a memorandum.

“However, the City’s General Fund revenue has not kept pace when matched with the growing costs of municipal services and maintaining facilities. It is becoming increasingly challenging to maintain the quality of City services that the community has come to expect. The City has done well in responding to this challenge by reducing costs and streamlining City services. These cost-saving measures have included reducing staff, deferring infrastructure maintenance, investing in technology to reduce ongoing costs and outsourcing services.”

In order to balance next year’s budget, $1.2 million in one-time resources of unclaimed deposits are being used.

The budget workshop was attended by virtually no one from the public with the audience made up almost entirely of top city employees.