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Sales-tax measure defeated in Half Moon Bay

By Paul Jones | 2 Nov 2010

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Staff writers Jamie Hansen, Joe Ciolli and Elahe Popat contributed to this article.

Voters in Half Moon Bay appear to have rejected Measure K, a proposed one-cent sales tax increase.

Voters in Half Moon Bay yesterday rejected a one-cent sales tax increase that city leaders had portrayed as a life-saving measure for the coastal community swimming in debt.

Officials said they were preparing to call an emergency meeting as early as Thursday to discuss options for closing budget shortfalls. “This all part of the democratic process and (Tuesday) we heard from the community that they want us to tighten our belt,” Mayor Marina Fraser said.

Interim City Manager Michael Dolder added, “We’re going to have to make decisions about cuts and how we’re going to sustain ourselves.” Dolder said maintaining police services would be the top priority.

Half Moon Bay’s Measure K received support from 47 percent of city voters, shy of the majority plus one vote it needed for passage.

If it had been approved, the measure would have brought in about $1.4 million annually for seven years. That would have been a boon to a city that faces a $500,000 budget deficit and must pay more than $1.12 million annually for 30 years to service bond debt it took on after settling a land-use lawsuit in 2009.

Without the sales tax hike, the deficit could reach $1.1 million next year, Dolder said.

With two-thirds of its reserve funds spent, the city had warned residents that it might make deep cuts in, or contract out, government services. There was talk of  asking the San Mateo County Sheriff’s Office to take over law enforcement and even whispers that the city would have to disband.

A number of Half Moon Bay business owners opposed the measure on the grounds that it would have hurt commerce. George Gipe, whose wife owns a women’s clothing store, said the city should instead spend more of its reserve funds and sell the Cabrillo Highway property that it acquired in the 2009 land-use lawsuit settlement.

“I think the sales tax is the most destructive of all taxes to local economies,” Gipe said.

As a result of yesterday’s vote, Half Moon Bay’s total sales tax will remain at  9.25 cents on the dollar.

Cities throughout the Peninsula turned to voters to help them solve their fiscal woes. In Campbell, southwest of San Jose, there was strong support for Measures M and N, which both passed with more than 70 percent voters in favor.
Measure M amounts to a $50 increase in the license tax for most businesses, depending on their size. Measure N will raise the existing tax on hotel rooms from 10 percent to 12 percent.
During the campaign, officials argued that Campbell’s tax rates are lower than other nearby cities and that the $250,000 Measure M would bring in annually is important to maintain city services, from policing to street repair.
“The reality is that without additional revenue, there will be more cuts to the services that residents appreciate,” City Manager Dan Rich said.
Menlo Park’s Measure L, which aimed to cut the city’s public employee benefits, was also victorious, with 72 percent of voters in favor.
Measure L will cut the city’s public employee benefits, changing the retirement age for non-police employees from 55 to 60 years and reducing pensions from 81 percent of an employee’s best salary to 60 percent. It will also block retroactive benefit increases, while requiring voters to approve any future pension hikes.

The measure was proposed by Henry Riggs, a Menlo Park planning commissioner, and Roy Thiele-Sardina, a venture capitalist. Riggs said the city’s budget is constrained by payroll costs, which are more than 70 percent of its annual budget. “If you want to attack the elephant in the room, you have to address payroll,” Riggs said.

Carolyn Clarke, a city housing commissioner, argued that local government should make the call, not voters. “If [pension matters] are decided at the voter level, that just creates more red tape” she said.

Municipal governments also received good news on Proposition 22, a statewide measure that would severely restrict the state’s ability to seize local revenue in the future. It passed with 54 percent voting in favor to 45 percent against.
The battle between cities and the state over local revenues has been bitter. In 2009, California legislators dipped directly into city budgets by forcibly borrowing more than$1.9 billion in property taxes. The state gave cities the option to wait three years to be paid back or sell the state’s debt on the bond market for an immediate, discounted return. Redevelopment agencies recently lost a lawsuit to keep $2.1 billion from the state. In response, local governments supported Proposition 22.

“If Proposition 22 [hadn't passed] we would be vulnerable to future state take-aways, which we anticipate would result in further reductions of services to our community,” said Starla Jerome-Robinson, Assistant City Manager of Menlo Park.

Chris McKenzie of the League of California Cities, one of Proposition 22′s main backers, the new law will create a “firewall” between state and local revenues.

“It will create predictability for local governments, and it will force the state to deal with its budget problems,” McKenzie said.

Unions representing firefighters and teachers have been critical of Proposition 22, which they see as a threat to the cash-strapped state’s ability to fund their services.

“It [will] cost schools immediately $1 billion this year, and [will] cost about $400 million a year in statewide funding lost,” said California Teachers Association representative Eric Heins. “That money is instead locked in for use by redevelopment agencies [to] subsidize developers.”

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