1% San Diego Sales Tax Boost Ballot Measure for November Election

SD City Council OKs 1% Sales Tax Ballot Measure for November Election - Times of San Diego

Elizabeth Ireland

Here's a summary of the key points from the document:

1. The San Diego City Council unanimously approved a ballot measure for a 1% sales tax increase to be voted on in November 2024.

2. If passed, the measure would raise San Diego's sales tax from 7.75% to 8.75%, potentially generating $400 million annually for infrastructure and city services.

3. The city needs $9.25 billion over the next five years to address its infrastructure backlog.

4. Major areas requiring funding include stormwater management, water infrastructure, parks, and streets/roads.

5. Critics argue that sales taxes are regressive, disproportionately affecting lower-income residents.

6. Proponents, including Mayor Todd Gloria, argue the tax is necessary to improve quality of life and address long-standing resource shortages.

7. The proposal includes accountability and oversight measures to ensure proper use of funds.

8. San Diego currently has one of the lowest sales tax rates among California cities.

9. A similar sales tax increase (Proposition D) was defeated in 2010.

10. The proposal will still need full City Council approval before being placed on the November 2024 ballot.

The San Diego City Council Monday unanimously approved a ballot measure which, if approved, would increase sales tax in the city by 1% intended for broad infrastructure and city services funding.

“Today, by voting to place a sales-tax measure on the November ballot, the City Council made a courageous, bold move that has the potential to enhance the quality of life for every resident of our city,” Mayor Todd Gloria and City Councilman Raul Campillo wrote in a joint statement. “It is an opportunity to address the longstanding shortage of resources that for decades has held our city back and caused our infrastructure like streets and sidewalks and public assets like parks and police stations to fall into disrepair.”

Sales tax currently represents the second largest revenue source for the city’s General Fund, comprising 18.9% of the total revenue.

If the ballot measure passes in the November 2024 election, it would raise the city’s sales tax rate from 7.75% to 8.75%. Among the 481 cities in California, San Diego’s 7.75% sales tax rate is tied for fourth lowest, a city report found.

Gloria and Campillo estimate that if the measure is successful, it would generate $400 million annually for neighborhood infrastructure such as streets improvements, storm drains, parks, libraries and services such as public safety.

“This City Council and Mayor have prioritized necessary long-term fixes to our infrastructure rather than band-aid solutions — and with the voters’ approval of this measure, we have the chance to truly double down on this approach,” the mayor and councilman’s joint statement read. “By working together to pass this measure, we can build a city that not only functions but thrives — not just for the present generation, but for generations to come.”

While the council passed the item unanimously, it did not come without its share of detractors. People speaking at Monday’s council meeting reminded the legislative body that sales taxes are seen as some of the most regressive, as they impact lower-income city residents and visitors significantly more than the more affluent.

According to a city report, $9.25 billion is needed over the next five years address an infrastructure backlog, and would comes with checks to make sure the funds head where intended.

“The proposed ballot measure includes strict accountability, transparency, and oversight to ensure that revenue generated from the Transactions and Use Tax goes directly to essential city services and infrastructure in the city of San Diego,” the report reads.

While San Diego went through its Fiscal Year 2025 budget process, service cuts were largely avoided. However, according to the city’s Independent Budget Analyst Charles Modica, bigger cuts to projects and services are likely in the future unless the city can secure more revenue — like that provided by the sales tax increase proposal.

On Friday, San Diego City Council President Sean Elo-Rivera and Council President Pro tem Joe LaCava, announced they were withdrawing a proposed stormwater funding measure, citing “substantial changes” to ACA 1, a proposed state ballot measure which, if approved by voters, would have set the threshold for voter approval of local infrastructure funding at 55%.

Saying it will bankroll infrastructure and quality-of-life improvements, the San Diego City Council’s Rules Committee Wednesday unanimously advanced a proposed 1-cent sales tax that could go before voters in November.

The committee’s vote will allow staff from the mayor’s office and council District 7 to work with the Independent Budget Analyst’s office and city attorney to draft the ballot measure framework, according to a staff report. The officials will also “provide preliminary fiscal, operational and legal analyses of the proposal,” according to Councilman Raul Campillo’s office.

Proponents say the increase is needed to improve city roads, storm drains, public safety and facilities such as parks and libraries.

The proposal will return to the Rules Committee for a second reading, and will still approval from the full City Council in June or July before it can be submitted to San Diego voters. If passed, the measure would raise the city’s sales tax rate from 7.75% to 8.75%.

In a brief presentation to the committee, Mayor Todd Gloria described the proposal as “a bold initiative that has the potential to enhance the quality of life for every resident in our city.”

According to a staff report, $9.25 billion is needed for infrastructure repairs and maintenance in the city. Among municipalities in San Diego County, San Diego ranks near the bottom in terms of tax rates, several officials said.

Campillo, who represents District 7 and sits on the Rules Committee, said the vote Wednesday was an important first step not only for better infrastructure, but it also offers a plan and an opportunity to deal with the budget deficit.

Unless the city acts, there will never been enough money for infrastructure repair or other vital services, he said. While concerns over higher taxes are valid, Campillo said, it’s the city that is responsible for “things you see above ground, and things that work under the ground,” including roads and police protection. “This is about a plan — not just one penny,” he added.

Several supporters of the measure spoke to the committee to urge its approval.

Matt Kostrinsky of the American Federation of State, County and Municipal Employees Local 127 told the panel road crews are currently just patching roads rather than fully repairing them.

“In my own community, we have residents who have funded two playgrounds,” he said, adding that other neighborhoods need better sidewalks, street lights and roads. He said people can argue about taxes or debate past issues, “but we gotta face the facts of what’s ahead of us.”

Former City Councilman Michael Zucchet — now a Port of San Diego board commission member — said previous city leaders misled voters by telling them more could be done with less, and by “doing magic tricks with the budget.”

Opponents, however, said a sales tax hike would make little sense in a time of higher prices and city budget woes. Some also blamed the city’s fiscal woes on previous poor decision-making by municipal leaders, specifically citing the 101 Ash St. building scandal that cost the city millions of dollars.

The Rev. Shane Harris of the People’s Association of Justice Advocates said while the proposed increase may be well-intended, there is already one on November ballot to fund transportation projects in the county.

“This city is the most expensive, not the most affordable,” he added. “Asking taxpayers for more is a bad habit. If this measure goes to the ballot, it will fail.”

Paul Krueger, of the San Diego Taxpayers Association, suggested there be a sunset clause for any tax increase, along with a performance plan.

“We think voters should get a chance to come back and look at what’s been done with the money,” he added.

Former Assemblywoman Lori Saldana said voters are right to be skeptical about any possible tax increase. She said the city should instead increase its transient occupancy tax rate on hotels, but she said elected officials won’t do because of the hotel lobby’s influence.

Campillo said city’s occupancy tax rate generates $30 million a year but now faces a legal challenge. he also said a sunset clause for the proposed sales tax increase would hamstring the city by removing a consistent revenue stream.

His colleague, Kent Lee, said there are nearly 200 projects in need of funding now, and he hears from constituents about the lack of progress for needed facilities like recreation centers. Just in the last year, the city filled more than 60,000 potholes, Lee said.

He added the funding shortfall didn’t happen overnight, but “was driven by generations of the lack of investment.”

Councilwoman Vivian Moreno, also a committee member, said she is supportive of exploring a proposed sales tax initiative, but added it “may be asking for too much” of voters who will also decide the county transportation measure.

Moreno said it may not be widely known that the city is running out of money, and stressed that Gloria must convince voters that the city is responsible enough to spend any additional tax revenue.

In a statement, mayoral candidate Larry Turner said the proposed tax increase “unfairly burdens working families, exacerbating financial hardships for those who can least afford it.”

“Our mayor and this city council have failed to demonstrate responsible stewardship of taxpayer dollars,” Turner said. “It is imperative that we demand transparency and accountability in our city’s financial decisions.”

–City News Service

Analysis of Capital Infrastructure Needs

To determine the driving forces behind the proposal to increase sales tax, I have undertaken an analysis of the CIP needs. If we understand where this money is going we will more clearly understand the need. The City of San Diego (City) Fiscal Year (FY) 2024-2028 Five-Year Capital Infrastructure Planning Outlook (CIP Outlook) provides information on policy, regulatory, and other criteria used by Asset Managing Departments (AMDs) in determining capital infrastructure needs, as well as the bases for revenue projections of capital funds, and other considerations relevant to managing a citywide capital
program. On the surface the situation looks pretty bad, with needs more than twice the funds available as seen in the chart based on Table 2 of the CIP Outlook with the FY 2024 situation even worse.

The drivers for the large variation from year to year are highlighted in the following bar chart using data from table 3. Two areas: Stormwater and Parks and Recreation have large jumps in 2024. It should be possible to level out Parks and Recreation capital expenditure better.

To get an idea of where the money is going, I've taken the figures from Table 3, sorted them in decending amount, and generating the following pie chart which shows that 4 areas: Stormwater, Water, Parks, and Streets and Roads take over half the CIP budget.

Dedicated versus General Funds

Certain areas seem to be fully funded from dedicated sources, some are partially funded, while other types are dependent on the general fund which uses sales tax revenue. To identify the unfunded need for each CIP type to help with allocating general funds. I've created a table that shows the five-year funding need, the identified dedicated funding (where possible), and the resulting unfunded need. This should help highlight where general funds might be needed most.

CIP Type	$ Five Year Funding Need	Identified Dedicated Funding	Unfunded Need
Bike Facilities	131,818,498	Partial (not specified)	Not fully quantifiable
Bridges	231,837,427	Partial (not specified)	Not fully quantifiable
Emergency Shelters	99,078,152	-	99,078,152
Existing Facilities	78,014,664	-	78,014,664
New Fire Stations	357,085,445	Partial (not specified)	Not fully quantifiable
New Lifeguard Stations	12,000,000	-	12,000,000
Fleet	230,000,000	15,342,782	214,657,218
New Libraries	38,477,712	Partial (not specified)	Not fully quantifiable
Parks	1,094,890,956	Partial (not specified)	Not fully quantifiable
New Police Stations	63,559,000	-	63,559,000
Sidewalks	244,660,000	Partial (not specified)	Not fully quantifiable
Stormwater	2,138,817,697	526,386,046	1,612,431,651
Streetlights	574,181,000	Partial (not specified)	Not fully quantifiable
Streets and Roads - Modifications	130,062,798	Partial (not specified)	Not fully quantifiable
Streets and Roads - Pavement	987,180,712	Partial (not specified)	Not fully quantifiable
Traffic Signals and ITS	175,513,700	Partial (not specified)	Not fully quantifiable
Pure Water - Potable Reuse	824,169,064	Partial (not specified)	Not fully quantifiable

Key points:

Enterprise funds (Airports, Wastewater, Water) appear fully funded.
Landfills also appear fully funded through dedicated sources.
The largest clearly quantifiable unfunded need is in Stormwater projects, with over $1.6 billion unfunded. Failure to maintain or improve the ability to handle rainwater has led to flooding and billions in property damage to city residents. Perhaps longer term bonds could be more reasonably used to fund this, although that would incur significant interest expense.
Fleet has a significant unfunded need of over $214 million, although purchase of EV's seems misguided given the lack of charging infrastructure.
Emergency Shelters, Existing Facilities, and New Police Stations have no identified dedicated funding. Perhaps funding from developer fees and fees on construction permits should be used to help fund emergency homeless shelters.
Many categories have partial funding from various sources, but the exact amount isn't specified, making it difficult to quantify the unfunded portion.

For allocating general funds and justifying the sales tax increase, the city might prioritize:

1. Stormwater projects, given the large unfunded need and critical infrastructure importance.
2. Emergency Shelters, Existing Facilities, and New Police/Fire/Lifeguard Stations, which have little to no dedicated funding.
3. Fleet upgrades, which have a significant unfunded portion.

For categories with partial funding, the city needs to do a more detailed analysis to determine the exact unfunded amounts before allocating general funds.

Here We Go Again - City Sales Tax

As recorded in Ballotpedia, A City of San Diego Sales Tax and Financial Reform Package, Proposition D was on the November 2, 2010 ballot for voters in the City of San Diego in San Diego County.^[1] It was defeated.

Supporters of the sales tax increase called it the Financial Reform Ballot Measure.^[2]

The sales tax paid on purchases of goods and services in the city would have increased by half-a-cent if voters had approved Proposition D. The new, increased, tax would have been 9.25 cents. The half-cent hike would have been in effect for five years and would have generated about $103 million/year in increased tax revenue for the city.^[3]

The sales tax hike was conditional on a package of financial reforms. San Diego's city auditor would have been required to certify that 10 fiscal reform measures have been implemented before the tax would have been allowed to go into effect.

The competing campaigns for and against Proposition D cumulatively spent close to $1 million.^[4]

According to the San Diego Union-Tribune, the defeat of Proposition D "continue[s] a pattern of labor unions losing city ballot initiatives over the past decade, a period in which public anger over guaranteed pensions for public workers has reached a crescendo."^[4] City councilman Carl DeMaio, an opponent of Prop D, said, "The public is a lot smarter than the labor unions think. You can’t throw up a bunch of ads saying that if you don’t raise your taxes the world will swallow your house whole and have any credibility, particularly when people know in San Diego about the full extent of the pension crisis."^[4]

The video above is an interview with University of San Diego economist Professor Alan Gin about Proposition D, which proposed to increase San Diego's sales tax. Key points include:

San Diego currently has the lowest sales tax rate in San Diego County and one of the lowest in California.
Even with the proposed increase, San Diego's sales tax would remain relatively low compared to peer cities.
While sales taxes are generally considered regressive, exclusions on necessities like groceries and medical care make it less so.
San Diego faces an incompatible situation of having low taxes but desiring high levels of services, leading to a structural deficit.
The impact of the sales tax increase would be most noticeable for those on fixed or low incomes.
Prof. Gin suggests that while not ideal, the sales tax increase is currently the only option to address the budget deficit.
He recommends broadening San Diego's tax base to make it less vulnerable to economic downturns.
Gin proposes considering other revenue sources, such as trash collection fees, which would require amending the People's Ordinance.

The interview provides context and expert analysis on the proposed sales tax increase and its potential impact on San Diego's budget and residents.

Funding needs from sales tax would be regressive, taxing those in lower income brackets the most proportionately, as well as being most subject to fluctuations in the economy. Sales tax does have the effect of hitting tourists more. Purchase of big ticket items such as cars and appliances may also be pushed to other lower tax cities such as cities in Orange County, San Bernardino and Riverside, so that they don't yield the expected return, although other cities in California already have higher sales tax, some over 10%.

City	County	Total Tax Rate
Oakland	Alameda	9.25
Fremont	Alameda	9.25
Fresno	Fresno	7.98
Bakersfield	Kern	8.25
Los Angeles	Los Angeles	9.50
Santa Clarita	Los Angeles	9.50
Long Beach	Los Angeles	10.25
Glendale	Los Angeles	10.25
Anaheim	Orange	7.75
Irvine	Orange	7.75
Huntington Beach	Orange	7.75
Garden Grove	Orange	8.75
Santa Ana	Orange	9.25
Moreno Valley	Riverside	7.75
Riverside	Riverside	8.75
Elk Grove	Sacramento	7.75
Sacramento	Sacramento	8.75
Fontana	San Bernardino	7.75
Ontario	San Bernardino	7.75
Rancho Cucamonga	San Bernardino	7.75
San Bernardino	San Bernardino	8.00
San Diego	San Diego	7.75
Oceanside	San Diego	8.25
Chula Vista	San Diego	8.75
San Francisco	San Francisco	8.50
Stockton	San Joaquin	9.00
San Jose	Santa Clara	9.25
Santa Rosa	Sonoma	9.00
Modesto	Stanislaus	7.88
Oxnard	Ventura	7.75

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