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