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Sales tax measure defeated by council


The Escondido City Council July 15 by a 3-1 vote failed to approve a 1 cent sales tax for the November ballot. The vote was McNamara, Diaz and Martinez, yes, and Mike Morasco, no.  It requires a four vote supermajority to put a taxing measure on the ballot.

Before the vote Assistant City Manager Jay Petrek shared the Community Opinion Survey that led staff to recommend putting the sales tax measure. The city faces a structural budget gap of over $176 million over the next two decades.

The survey was conducted by True North Research by phone and online in English and Spanish between June 2 – 12, 2020, to a random sample of 2,000 registered voters and non-voting adults equally distributed amongst all four City Council districts. The margin of error was +/-2.17 percent.

It found that 71% responded “Definitely Yes” or “Probably Yes” for the measure. Those responding “No” or “Not Sure” were 20% and 7% respectively.

Tim McClarty of True North said the survey asked respondents to prioritize their desires and gathered information to help the council make policy decisions. 

McClarty said, “People are spending more time at home; they have more time on their hands. They may just want to talk to somebody else for a change and consequently the participation rates in the surveys have been really high.”

Respondents were also asked to say in their own words what they wanted to see preserved in the future. “We looked at those verbatim responses and grouped them into categories,” said McClarty. The most mentioned categories were the downtown area, Grand Avenue, diversity of businesses and cultures, city activities and the small town feeling. 

For service/project spending priorities, the survey listed as the highest: Improve the maintenance and repair of city streets and sidewalks, 92%; Repair aging sewer pipes and storm drains, 92%; address homelessness, 89%; support the development of affordable housing for middle-income families, 75%, Support the development of affordable housing for low-income families, 67%.

Ask to rate the importance of municipal services, some of the top  (considered extremely or very important) were: providing fire protection and prevention services, 94%; providing paramedic and emergency services, 94%; maintaining and repairing local streets and roads, 94% reducing crime and gang activity, 93%; maintaining sewer and storm drains, 92%; addressing homelessness, 89%; preserving natural open space and parkland, 88%; providing police services, 85%.

About 65% surveyed had favorable opinions of the city’s quality of life, with 9% reporting “Excellent,” and 56% “Good,” 29% Fair, 5% “Poor,” and 1% “Very poor.”

The survey included questions about cannabis: 49% indicated “Yes, should allow” cannabis businesses to operate, 35% responded “No, should not allow,” while 15% were “Not sure.” Of the type of business that should be allowed, 66% responded “Yes, allow” for medicinal retail dispensaries, most indicated support for researching and testing of cannabis products (58%) and businesses that deliver cannabis to private residents, 51% . The least support was for recreational retail cannabis dispensaries where 44% indicated “Yes, allow” versus 41% for “No, don’t allow.”

Councilmember Olga Diaz said the results on the popularity of public safety didn’t jibe with comments last month as part of the “publicly expressed sentiments in our own city and nationally. . . including a record number of public comments on our budget process just last month that’s in conflict with what you’re telling us.”

Referring to the upcoming tax increase measure, Diaz said it might be better to call it a “public services measure” versus “public safety and services measure.” 

McClarty said “protests notwithstanding,” the survey was taken in June amidst the George Floyd protests. “So if there was this big pushback about public safety, we would have registered that. Yet when you look at it, the number one comment is ‘I want more public safety.’”

The council considered a resolution placing a “public safety and essential services” measure on the November 3 election.

Assistant City Manager Jay Petrek noted discussions over budget and revenue projections have taken place for months. “Tonight’s presentation boils down to one simple question: for the City Council place a 1% sales tax revenue measure on the ballot for November 20 allowing voters to choose whether or not to approve the measure. Staff recommends that you let the voters decide the financial security and future of Escondido. Taking no action would have significant repercussions.”

Since 2008 Escondido has grown by 8,000 residents, said Petrek: “The city has experienced dramatic increases in public safety and emergency calls. The Police Department responded to more than 300 calls per day last year —a 10% increase over 2008 calls. Last year fire and paramedics answered almost 16,000 emergency 911 calls for service, a 30% increase over 2000. Over 80% of those calls were for medical emergencies.”

Since 2008 the city removed almost 39,000 graffiti tags and cleared out over 780 homeless encampments throughout Escondido involving more than 95 truckloads of refuse.

The city was founded in 1888, “so our infrastructure is really aging. Repairing, refurbishing and in a lot of cases replacing this infrastructure really impacts the budget,” said Petrek.

Of sales tax collected, Escondido sees 1%. It would keep 100% of a 1 cent tax increase. The largest general fund expenditure is for personnel, “The largest allocation, comprising 76% of the operating budget pays for public safety and public works personnel for police, fire, 911 emergency medical services, street and park maintenance graffiti removal and addressing homelessness issues. The remaining 24% support all other city departments.”

The city spends $703 per resident, which, said Petrek, is less than most cities in the region. This includes the PERS unfunded pension liability costs. 

Projected city revenues won’t keep pace with rising costs of providing services. This year the city faces a $10 million budget shortfall. “Without a source of revenue to address this budget gap, staffing reductions across all departments will be necessary . . . Maintenance of streets, parks and public places would have to be curtailed and this ability to respond to graffiti and homeless issues will be impacted.”  Petrek noted that these calculations were pre-COVID-19.

The city is employing cost cutting measures, he said, including switching 6,000 street lights to LED bulbs, saving about $700,000 annually in energy costs. It also negotiated multi-year contracts with the police department, reducing employee turnover and training costs. Escondido’s sworn officers per capita are well below the region and public safety per capita spending is second lowest in the region. “The city employs nine fewer sworn police officers than in 2008,” he said.

Petrek said, “All departments are currently reviewing their allocations and will need to scale back or eliminate services they provide because more than 75% of Escondido general fund operating budget is allocated to public safety and public works cuts in these departments cannot be avoided.” He added, “No department can be unaffected.”

The 1 cent sales tax would generate $25 million every year. All would stay in Escondido with none going to Sacramento.

The city’s current sales tax is 7.75%, the base rate for SD County.  The city receives 1% of the sales tax collected for items purchased here. One third of sales tax revenues collected by Escondido comes from non-residents and tourists shopping in Escondido and business to business transactions.

Diaz said, “I have mixed feelings about this particular approach to solving our fiscal challenges. But I’ve also been on the council long enough to know it’s very difficult to increase revenue in a public agency. The recession  in 2008-2009 was very challenging to navigate.” The response included furloughs, pay cuts, and “a lot of unnecessary investments just to make ends meet,” she said. “That was unpleasant at best and we navigated it but we are at a point with our financial projections where it would be devastating to have to balance the budget with the revenue resources we have available to us in the coming years.”

She called their options “minimal.” “Putting something on the ballot does not mean it’s approved. It means we’re soliciting input from our community about whether or not they want to be taxed.” She added, “That’s the difference in the narrative: saying we’re not taxing you, we’re giving you a chance to tax yourselves.”

Diaz wanted the wording changed to remove the description for funding for public safety gang and crime prevention, things that in “the current climate” some would consider as a racist “dog whistle.” “What we’re really talking about is essential services. That isn’t necessarily language that would make your community feel valued.” She added, “I think you can say we’re going to keep the community safe but when you throw the words ‘gang’ and ‘crime prevention’ in there that has an effect on people that maybe not everybody wants to recognize or accept.”

She wanted to consider whether a ½ cent might raise enough money, and bring Morasco on board: “What consideration can we give today for changing the rate from a full to half and adding a sunset?”

Petrek said the lower rate would raise $14 million annually and the higher rate up to $25 million. “Our structural budget gap has annual deficits of up to $14 million so it would not cover the entire amount of the budget gap.” It would, he said, cover the cost of maintaining the status quo. “You would not have additional funding to do additional park refurbishments, playground equipment replacements and so forth.” Doing the one cent tax for only ten years, he said, “doesn’t get you as far into the budget gap needed to solve the problem.”

City Manager Jeff Epp, who has worked for the city more than 30 years, said, “The one over-arching thing I have noticed over the years is that it is easier for the city to raise money and it never gets less expensive. In other words the pressures we face to run the city only go up and the ability to raise money only gets more constrained.”

Councilmember Consuelo Martinez said when she ran for office she had wanted to expand city services. “It was a goal of mine to make sure you have more things to do in our city because a lot of the things I grew up with in Escondido have disappeared. So it was a huge reality check from getting on the council and talking to staff and realizing what our current budget situation is.”

She said it was important to put the measure on the ballot and let the voters decide. 

Petrek added, “It will require money we don’t have even to maintain what we offer now. Ultimately it will be up to the public to decide how they want to move forward and to live with the decision they ultimately make.”

Before beginning his statement, Morasco wished everyone “Happy Tax Day, July 15. We have in California the highest income taxes in the nation. We have new state taxes coming our way. We have the highest gas taxes, possibly in the nation. This proposal would give us the highest city tax in the County.” COVID-19 costs “have been extraordinary for everyone, from the city itself to business, individuals and families.” Everyone has made cutbacks. “So the question people have been asking ‘Is now the right time for a proposed tax?’ Could we or should we wait to see what occurs over the next six to nine months year or whatever? To find out what is going to happen to us because we thought we were heading in the right direction. Only to find out yesterday that we’re heading backwards.”

He suggested waiting a few months until a new council is seated, and a new city manager and assistant city manager. “There’s a lot of change and a lot of turnover happening on the city level. So why not wait till after the November election before we start making these decisions that another council may have completely different opinions and perspectives on?”

He added, “It has been stated by Jay and reiterated by the city manager we cannot stop the state from imposing these unfunded mandates on us.” He said the business community and “tax watchdogs” would fight the tax. “I made a promise when I first ran for office in 2012 that I would not support any tax proposals. That I was in opposition to increasing taxes and I would support other potential sources or ideas or concepts —taxation was not one of them.”

Mayor Paul McNamara said the city and council were at “somewhat of a crossroads decision.” Although the future is hard to predict, “I tend to agree with our city manager they’re probably going to go up. If this is approved and the voters vote for, for a while we may have some extra monies initially it’s not out of the realm of possibility that in 20 years when this structural deficit is finally corrected, we won’t have any extra money.”

Putting the measure on the ballot would let voters make their wishes known. “The First Amendment allows for a marketplace of ideas, where you have debates. The idea being that the best idea rises to the top. I think we should expect and welcome opposition. if we approve this tonight we should welcome that opposition in the sense that we are looking for a public debate because the voters will have to decide what Escondido is going to look like next year and the years in the future.”

Saying he wasn’t “crazy about raising taxes but there’s a reality staring us in the face” he said, “I think if we don’t bring in other revenues we will create a downward spiral. Do you believe Sacramento is going to reduce regulations? I don’t. That’s going to cause us to do more and more as time goes on. So covering our costs and then having maybe a few extra dollars to mitigate some of these new regulations or be able to do some of the community services that people want us to do I think that’s a good thing.”

Diaz said it was a “deal breaker” not to change the language of the measure, “to make it more inclusive. I don’t want to perpetuate biased language.” She wanted “gang” and “crime prevention” removed. She said she didn’t want to create a climate of division. “I don’t want to create animosity for how we pay for essential services.”

Morasco said, “I don’t think there’s any possible way it could be modified to my satisfaction.”

McNamara replied, “We are not asking you to vote for it, we’re asking you to put it before the public.” He added, “I’m trying to reach consensus among the four members of the council because without it this is dead in the water.”

Asked his input about how much the tax increase might actually raise, Epp said, “We are dealing with an environment of sheer insanity now in terms of what’s going on with COVID.” He said he didn’t see things improving by spring. “Even if we stop right now, this will take us another two or three years to recover from.” He said it wouldn’t raise anywhere near $25 million at first.

Morasco reiterated that he prefers for a new council and new management in four months to look at the problem.  

“You could put on a special election in spring, although the odds for it passing would be less in a special election,” said Epp. “Whatever group in May is going to be facing exactly the same problem.”

The mayor concluded, “I think it would be a failure on our part if we don’t pass this tonight. 

I don’t think we’re going to be labeled as people trying to raise taxes. We will be labeled as people who recognize a long-term problem and we’re offering the residents a solution that they can decide to either accept or reject. If they reject it then we need to go back in our leadership role and come up with a Plan B.”

He added, “Even with COVID-19 we know that a majority of the people are in favor of this.”

Term Limit Proposal

In other business, the council voted 2-2 on a measure proposed by Morasco to put a measure on the ballot that would limit the terms of the mayor and the city council. 

“I think we’ve all seen what occurs through all levels of government, there seems to be an entrenching of people in positions,” said Morasco. “It’s something I’ve felt strongly about for a long time. It gives an opportunity for new perspective and new individuals to rise to the occasion.”

Martinez said she had supported the term limiting for Board of Supervisors, but felt that Escondido didn’t have this problem. “That’s why we have district elections. It allows for more diversity. District elections have been a good thing. I don’t see the immediate need of enacting term limits at this time,” she said.

Diaz said that, “I feel strongly that moving along is good. I’m self-selecting to leave. You can stay as long as you want. I think eight years can be short and 12 can be sufficient. It takes time to get really good at the job. 12 years is a good amount of time. 

Mayor McNamara commented, “I also feel that having term limits has merits, but I’m not sure in our case it’s been a problem. We haven’t had that many three term officials.”

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