HomeMy WebLinkAboutStaff Report 5.D 8/5/2013 Agientd,a,Itewv#5 .b
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DATE: August 5,2013
TO: Honorable.Mayor and Members of the. 'ty Council,
FROM: John C. Brown, City Manag
SUBJECT: Discussion,Regarding Possible Tax,Measure(s) for November 2014 Ballot
RECOMMENDATION
It is recommended the City Council discuss, and provide consensus to'move forward with polling,
to determine the viability of placing a tax measure(s) on the November 2014 ballot.
BACKGROUND
The City Council has takensa;long list of actions during;the past five'years.to preserve the financial
solvency of the General Fund through the,ecoribmic downturn:. Actions included but were not
limited'to laying off and eliminating full and part-time'employees;,offering "golden handshakes" to
encourage employees to voluntarily vacate positions; freezing vacancies;contracting out programs,
services and activities; negotiating temporary salary reductions with employees; eliminating
General Fund support for capital,projects; deferring and reducing maintenance of facilities;
terminating annual,contributionsrfor vehicle replacement;=reducing the rates charged to operating
budgets by Internal Service funds by depleting;reserves in-those funds; repeated reduction of
Services and Supplies accounts;'arid reassigning staff tithe to other funds,ifjustified. In 2012, the
City was also able to reachragreement with its represented employees,to establish second tiers for
PERS. This will not have a substantial effect initially, but will help to reduce PERS costs in future
years. City Council also increased'userfees, established new fees, increased reliance on Transient
Occupancy'Tax.proceeds, and all but eliminated reserves. These and other related actions enabled
the City to.balanceitsbudget.each year; but have increasingly affected the City's ability to provide
services by the employeesiwhoremain.General Fund spending during this period fell from a high
of nearly $49 million to less than$32 million. Over the last two years, total appropriations have
risen to approximately $35i million. This is primarilydue to increases in employee health and
retirement benefits, the loss.of grant funding that offset the cost of Safety positions, and the need to
resume=contributions to depleted internal service and replacement funds:and the General Fund
reserve. Fortunately, revenues have risen to meet increased expenditure demands, but not in
proportions great enough to meet future needs..
The Council has received long-term financial forecasts since January 2011, which enable the
Council to evaluate the effect of current actions on future financial position. Despite repeated and
Agenda Review:
City Attorney Finance Director City Manag
, I
dramatic budget reductions, because revenue growth is not sufficient to support cost increases,
forecasting projects negative fund balances in the "out years".The forecast completed in May 2013
assumes a_recovering economy and increased sales tax associated with=new.retail development. But
it also reflects a growing need to resume`investment in vehicles, facilities, and infrastructure;
ongoing increases in the costs ofemployee benefits; restorationof reserves in the funds that helped
to support the General Fund the past several years; and a gradual restoration of General Fund
reserves. Assumptions do not restore positions or adjust employee wages, support needed road
improvements or a fully functional:storm water maintenance system, nor are they nearly sufficient
to address the full scope of the need toreplace emergency and.other vehicles or to reduce unfunded
liabilities. Although the budget for 2013/14 is balanced,the May 2013 forecast projects negative
balances growing from.a'$142,3'89 deficitin 2014/15 to S2,334,029 in 2016/17. As discussed in my
budget message, the 2014/15 deficit can be addressed through spending control (this leaves no
working capital carryover to apply to future revenue/expense,shortfalls). Balancing larger deficits
and meeting unmet needs going,forward will require anew funding mechanism, tax increases, if'the
City is to remain responsiveto the publics' needs.
Two attempts were made during the past ten years to increaseitaxes in Petaluma. The first was a
proposal in 2003 (Measure D) to establish a utility user tax of 5"percent,for 20 years, to fund road
improvements. That measure was defeated by`a 32.8 percent margin. The:second (Measure X) was
an initiative in 2012 that would have established a parcel tax, ranging from $52 to$500 per parcel,
for fifteen (15) years,to fund parks and recreation facilities_and maintenance. Voters defeated that
measure by a 4.8 percent margin:,Both efforts proposed_specialpurpose taxes, which require a two-
thirds majority to pass. General-purpose taxes:require+a simple majority,"fifty percent plus one •
(50% + 1), to pass.
Not counting Measure X,,which was a citizen initiative, the Council.considered tax increases twice
in the past five years. In 2010,.the Council considered°,increasing the Transient Occupancy Tax
(TOT) by two (2) percent, which would have raised approximately $220,000 a year based on then-
current The Council did not pursue the increase, due to opposition from the lodging
industry and the business community. In 2012;the Council again considered a two (2) percent TOT
increase, projected at-that time to generate$270,000 per year in.revenue. The Council also
considered a sales tax increase;in 2012,,but did:not set;"an amount of term. Informal and
professional polling was,conducted at that time. Informal polling was inconclusive, but suggested
little'support for tax increases. Professional polling showedmoderate to strong support"for a‘,one-
half,(1/2);centsalestax increase, with a limit of five years, but less support for other scenarios. The,
Council chose td pursue neitlienoption:in'2012, as''there was concern that major-stakeholders would
not support'the effort, that a sales tax`measure would harm Measure X's chances of passage, and
that the City could not afford the•cost;of.placing its own measure on the ballot. Staff reports
provided to the Council in June and July 2012 are.Attachments 1 and 2 to this report-..For brevity,
the attachments to those documents are not included here, but can be found on-line by accessing.the
City Clerk's web,page.
In January2013„the City Council conducted annual,goal:setting, and adopted updated`,goals and
priorities in March 2013. Adopted as part of the priority "Continue to'-Seek Opportunities to
Enhance Revenue Sources", within the "Financial Stability" Goal Category is the task to "Consider
a ballot initiative in November 2014 to ask voters to approve a;sales tax to fund city.services".
Consideration of this task included a discussion of applying new revenues to Public Safet •uses, but
with a focus on Public Safetythat included Police and Fire programs and staffing, vehicle
replacement, street maintenance and lighting, and storm water improvements.
Since February 20.1.3, the City Council has held monthly workshops onselected topics taken from
the.Council's goals for 2013 and 201.4: Workshop'topics.included the mid-year review of the
budget'and updated financial forecast; wastewater improvements, General Fund reserve policies.and
funding considerations, the 2013/14 budget and updated financial forecast, storm water and flood
protection needs, and street:maintenance and road funding, The common theme emerging from
these workshops is that needs far outweigh projected resources, without added revenue, and that
new taxes are the only way to generate the amount of additional,revenue needed i&Petaluma is
going to be made and kept safer:
DISCUSSION
Conducting.a campaigmto obtain_voter approval for a tax measure:requires ample time and
significant effort and expense. ,Anticipating the City Council will want to consider this matter in a
timeframe that maximizestheroppbrtunity for a successful campaign, I contacted consultants who
specialize in tax measures to-discuss"timing, approach, services,:and cost. I did not conduct those
conversations to replace a request for qualifications process, but rather to gather information and
solicit advice. Two department heads have also worked.onssuccessful[sales tax measures for other
cities, and provided feedbacloon their experiences. As well,the Mayor,and Councilmember
Albertson visited the City of Fairfield, to discuss that city's,successful sales tax initiative in 2012,
and shared what they learnedfromvthat meetings From altiming standpoint,the City should initiate
if it is going,to, within the nextfew months;work to determine voter preferences, and the planning
process`for'a public prioritization and education'campaign..
Based on the feedback received.from'the sources noted, in every instance, a key component of a
successful tax measure was well designed polling`to determine,the public's voting preferences.
Such a poll can identify voter preferences"geographically and demographically, be statistically
representative in those regards;and dbe accurate to within a small margin of error. Polling results are
used to inform a-number of choices: the public's appetite for aaax increase; the kind of measure that
would be viewed.most=-favorably(i.e. sales tax, parcel tat, TOT:indrease; etc.); whether that tax
should be a general or'a special-purpose tax; whether a permanent increase or a lithitedierm
increase,has the best chance of passing,{and if limited term the,optimum sunset; the public's service
priorities and service:"level,preferences; and,whether,any measure,has a realistic chance of passing.
Polling results should also shape campaign strategy, and message.
Other key components successful campaigns include an education campaign`and an'advocacy
component. This latter component follows theiCity Council's decision to place a measure on the.
ballot, and is conducted and funded by a Committee formed for the purpose. City money and staff
time may not be spent on.advocacy, although it:i's perniitted and appropriate for the government,to
provide neutral and factual information regarding proposed,revenue'measures so that the public is
fully informed, employees may contribute their own time to the campaign, and Councilmembers
are free to take advocacy positions at any time..
Discussion during,some,of the workshops touched-onwhether a particular need should be supported
by a particular kind ofrevenue.:For example, sorm water conversations touched on a parcel-based
tax or assessment and sales tax increase. The'Conned was advised a combination of the two, or
I 3 i j
other funding;sources, might be,needed`to support this program: Likewise, during the street funding
discussion, conversation occurred regarding the equity to City residents of;a parcel-based tax as
compared tota sales'tax. Unless the;Council has strong feelingsabout omitting a particular funding
need or source from,consideration, however, it is recommended that the Council allow polling
results determine which funding sources are most appropriately-used to fund any particular service.
Likewise, polling results shouldshape decisions abourterm and amount,.or for that matter, other
aspects of a,proposed measure or measures. In discussions with research consultants, it appears
polling surveys offering between 40 and 60 questions would be expected to yield the most useful
results. Experienced research<consultants know how tordesign highly effective polling surveys. City
staff would work closely with the consultant to!develop survey questions that ensure the
information gained is pertinent to'the City's needs. Of primary interest is whether there is enough
public support to move forward with a measure. If polling shows there is not, results will identify
those services in which the community places the highest:value, and-the relative priorities the
community gives other services: That information will be extremely important in shaping future
budget decisions if new revenue is notforthcoming.
All of this said, it is recommended-that Council not make any decisions regarding a tax measure at
this time, but instead limit consideration to whether the Council would like staff to move forward
with polling. Several.consultants`provide these services, as well as the education and advocacy
activities noted earlier: If the Council chooses to move forward with polling, staff would engage.
the consultant of choice.through,a,request for qualifications process, and then work closely with that
consultant throughout the polling phase. RFQ's would also seek information regarding the
education and advocacy phases Of a campaign;Ito assist in consultant selection if the Council
chooses to initiate those activities at a later date.
With,respect to fundingthelcost of surveying, Staff does propose,to use City funds for this.work
but instead would seek contributions. Solicitation would occur while a request for qualifications is
being developed and circulated. Surveying can betailored'to the amount of money raised.
FINANCIAL IMPACT
Based on conversations with a:limited.number Of consultants, the cost ofconducting the kind of
survey that has been discussed ban range from;$20,000 to;$40,000: The cost of conducting a
campaign to pass a tax measure,;including polling, education, outreach, and advocacy could be less
than $100,000, but would more likely-range between"$100,000 and$200,000. Further, based on:the
Cost of placing,Measure X;on the ballot in'2012, election'costs can be expected;to`run in the range
of$50,000;if a measure-is placed on the November 2014 ballot. The City curren4 has no funding
budgeted for any of,these efforts: The'bulk of,thismoney will need.to.be raised-through fundraising
efforts, although election costs are typically included in the;CityClerk's budget
ATTACHMENTS
1. June 25, 2012 Staff Report (w/o-attachments)
2. July 16, 2012 Staff Report(w/o attachments)
OA:, ATTACHMENT 1
DATE: June 25, 2012
TO: Honorable Mayor and;Members of the City Council
FROM: John C. Brown, City Manager 1
SUBJECT: Discussion and Possible Action Related to Placing Tax Increase Measure(s)
. on-the November 2012 Ballot '
•
RECOMMENDATION
it is recommended that the Council consider andiprovide the Staff-appropriate edirection regarding
placing a tax increase measure,,or measures, the November 2012-ballot.
BACKGROUND .
At the City Council's May 21, 2012 budget meeting, Councilmember Renee;.expressed strong
concern with the degradation of,City services due to ongoing budget reductions. She requested
that the topic of a local sales tax, to restore and enhance city services, be agendized for Council
consideration. There was Council to agendize this matter. It was requested that the
conversation include the Transient Occupancy Tax. The Council briefly entertained a similar
discussion in 201'0, and,further explored increasing the TOT. An increase.measure was not
placed on the ballot at that;tiine, due to a lack of Support from the lodging industry and business
community. The Council further,,and briefly,:entertained a tax increase conversation during its
2012 goal setting session. Council.asked,staff to explore the feasibility of placing a TOT -
increase on the June 2012 ballot. Doing;so was infeasible,,due•to the findings that would have
needed to have,been made and supported;at that time,the,cost of placing a measure on the June
ballot, and the-continued lack of support from the lodging and business community.
It'is.estimated.that,Petaluina,will receive approximately S9.9 million in FY 2012/13. This
represents the City's approximate one (1%)share of the State-wide base-uniform sales and use
tax. It is further estimated that,P.-etaluinawill receive-S1.350rriillion in TOT proceeds in
FY 2012/13, based on.Petalunia's-TOT rate-often (10%) percent:
Petaluma's base sales tax rate is currently consistent with`three other jurisdictions in Sonoma
County. Other jurisdictions have imposed increases ranging from one quarter (1/4)to one half
(1/2) cent in local sales tax. One jurisdiction, Healdsburg, has placed a one half cent-increase on
the November 2012 ballot. The followingaable provides a comparison of Sales tax rates in
Sonoma County cities:
Agenda Revie
(,,,_,\9)
City Attorney"v/ Finance Director City Manager vi
S
Sales Tax Rate Comparison,SonomaCounty Cities *
env RATE.
Cloverdale 8.0%
Cotati 8.5`% •
Healdsburg 8.0 %.t •
Petaluma 8:o %
•Rohnert Park 8.51%
Santa Rosa 8..51°1 I
Sebastopol 8.25%
Sonoma 8.5)% 2
Windsor 8.0'1%
*State Board Of Equalization„May2012, except.City of Sonoma
1 V.cent increase on hovembec 2012+ballot
2 %:cent increase approved on.June2012 ballot.
TOT rates charged.in Sonoma County generally consist of.two'compgnents, the rates adopted by
the various jurisdictions to fund services within.the cities, and,•a separate rate collected by most
jurisdictions to.support a county-wide or local business improvement;area. TOT as discussed in
this report excludes the rates collected to support BIA's. Of the cities:in Sonoma County with
'transient occupancy taxes, Petaluina's rate is consistent with four other-jurisdictions. Other rates
range from nine (9%) to twelve (12!'/o)•peicent. The following::table.provides a comparison of
TOT rates in Sonoma County:
Transient Occupaney`Tax Rate'Comparison;•'.SOnoma'County Cities
CITY RATE
Cloverdale 10 %
Cotati 16
Healdsburg 12 %
Petaluma 10 %
Rohnert Park 12%
Santa Rosa 9 Y.
Sebastopol l'0 %
Sonoma 10%.
Windsor 12 %
DISCUSSION
As previously indicated, the City's estimated sales tax>revenues.for fiscal'year 2012/2013 are
$9.9 million. Increasing the rate,to•eight:and one-halfpercent (8.5 %), consistent with three
other Sonoma'County:cities,.would generate an additional;,$4'.95,Million in annual revenues for
Petaluma. A one-quarter cent (•25%) increase would net an estimated 52,475,000 annually, If
adopted as a general purpose tax, these funds could be'utilized for any city general governmental
purpose.
i r^
W
Asthe Council is,aware; the,City of Petaluma,has ezperlenced,extreme f nancial-hardship since
FY 2007/08. Funding for along listof City services was;reduced,and.approximately 20 percent
of.the City's workforce was laid;off; eliminated,,or,vacant positions'frozen. Funding for:capital
projects,facilitiesMaiiitenance; vehicle replacement, and reduction of long-term pension liability
was also suspended, or severely reduced. This brought General:'Fund spending down from a
2008 rieVel'of$48 million to_a:current level of$325 million. In tie process; General Fund
reserves were exhausted. As if this situation was not sufficiently severe, the:loss of
Redevelopment has shifted employee costs from the Redevelopment fund to the General and
other funds, funding,fot-regional,and local transportation projects is threatened, and funding for
non-profit organizations who.provide asocial safety net is"lost: A recent correction in charges
has further exacerbated financial hardship, leaving approximately$500,000 in storm water
maintenance costs peryear in.need:Of an alternate fundingsource.
This situation has created a large pool,of unmet,needs, many of which could be addressed with
the additional revenues'ithata sales,tax'increase could provide. For discussion purposes, City
departments have submitted for yourconsiderati'on whatthey:considerto be their most pressing
needs or the best use of increased;sales tax proceeds (attachments), These items are not
prioritized. Nordo•they include the projects that would be funded with the parcel,tax proposed
by the Petaluma Friends ofRecreatiOn'.(PFOR) if that measdre,is approved by the voters. I would
Suggest that from among all these!itenis; some of the niostpressing are restoration of the City's
reserves; street reconstructions and maintenance; vehicle replacement, street light maintenance,
dredging, and storm water maintenance. Unless+'the:Council issinterested in implementing a
permanent or long-terns increase, I would suggest treating these monies;as one timereyenues. In
doing so, avoiding programs thai contain staffing or regularly,recurring costs is also
recommended. If the Council is interested in a longer term, or permanent increase, the revenue
generated from increased sales tax could be leveraged byAtsing.it to support bonding for public
improvements. In particular, a significant amount of road workicould be done if financing could
be secured against this revenue source. This fundingeould also be used to provide a solution to
storm water maintenance financing,challenges.
If the Council wishes to pursue.a sales tax;increase, the monies can be used.for either special
purposes, or for general purposes. As a,special purpose tax,which:would provide guarantees to
the voters as,to how the funds would be:spent, a simple majority vot'eof the City Council would
be sufficient;to place the tax measure.on.the ballot, and a.2/3'majority vote of the electorate
would be necessary for the measure to pass. A general purposes tax would provide the:Council.
broader spending discretion but less specificity to voters. Typically, general tax measures must
be approved by 2..2/3 majorityofthe legislative body fot.placement on the ballot, and approved
by simple majority of the electorate;to pass. There is case law indicatingtlatthe 2/3 council
vote requirement for placement:of a general tax before the voters does not apply to charter cities
like.Petaluma. If a tax increase:is:to be placed on the ballot,staff recommends that it be a
general purpose tax, ratherthan ayspectfib purpose tax.
The Council will also need to determine, if a measure is to,be placed on the ballot, whether it
will be temporary or pcnnanent, and if it is to be4emporary for how long. A.permanent or
longer term tax increaseswould fund more'need, would provide greater long-term stability, and
facilitate the itse;of some of the?proceeds for serv'icing.banded.indebtedness. A temporary tax
1
The Cotincil wtll`also ne,ed;to determine,-if a measureis`to'be placed on the ballot; whether it
will be temporary orpermanen:t, and if it.is','to be temporary for how long: A permanent or
longer term tax increase would fiuid more!needl,would provide greater long-term.stability, and
facilitate;the use of Some of the proceeds for servicing bonded indebtedness. A temporary tax
increase may be viewed:rnore favorably hythe voters and.be'mote likely to pass. Of the eleven
jurisdictions that placed sales tax measures on the June,:ballot, only one.did.not place a"sunset"
on the increase. 'Only that oneimeasure, ofthe eleven,Jailed..Of thosemeasures with sunsets,
eight were forfiveyears or less, and,allof thoselmeasures Were for Ys cent.increases.'
With respect to the Transient Occupancy Tax, the City Council hasshown interest in the past in a
two (2)percent increase: Based omestimates for FY 2012/13'this would generate approximately
$270,000 per year, and would=set;Petaluma's base TOT rate at 12:percent. This would equal the
highest rate of Sonoma County cities, arid'has been opposedin-the past by the local lodging
industryand the business community As with sales tax, rf anincrease is adopted asa general
purpose tax,these'funds could be:utilized for any city general governmental purpose and would
only require a simple majority vote of the electorate to pass If,the,use of funds:is.designated, a
2/3 majority vote of the>electorate•wouldbe required. In the past,.discussion regarding the use of
these funds has focused'on augmenting monies available for promoting tourism.
Proposition 218 requires that local elections on general taxes,must be•consolidated with regularly
scheduled general elections.for members:of the got/ fining body of the local government. Local
elections on general taxes do not have to be consolidated with'legislative body member elections
in cases where the legislative body declares by unanimous vote'that an emergency exists . The
consolidation requirement does'notapply to.special taxes. Special taxes may be offered at
elections other than general elections lot legislative body inerribers.
If the Councilinterids to place,:a tax measure or measures oir the ballot:for November, it must
approve offering the measure(sj to the voters.by August 10,:2012. The'=Council may act on the
measure(s) by resolution, although,the actual measures) for consideration by the voters would
be in,ordinance form: Timing, including;all.applicable,noticing,.would require the Council to
act to placeanytax measure forthe No, vember, 2012 election.before the voters by the regular
meeting of August 6,:2_0.12.
FINANCIAL IMPACT
The estimated costfor`placinga measureon"the;Novemberballotranges from $15,69 to
$31,277. This rsbased on the County Registrar's esttmate,of$ 50 to;$_1;00 per voter. Currently
there are 31,277 voters',registered in Petaluma. If the Council;places two measures on the ballot,
cosrestimates range from $31,277 to $62,554. Costs'Would be bbrne.by the General Fund but
are not currently budgeted.
ATTACHMENTS
1. Proposed Use:of Tax,Funds memos from Departments
2. M'emo'regarding,Potential:Social.Service Safety Net
Coleman, "Local Revenue Measures in California June 2012 PreliminaryResults',,,CaliforniaCityFinance.Com.
June 6. 2012.
0.
•
• ATTACHMENT 2
G pouyy
. 2859
' DATE: July 16; 2012
TO: Honorable Mayor-,and Members of the'CityCouncil
FROM: John C. Biowri, City.Mai ages
SUBJECT,: Consideration aa'.Sales Tax Increase.Measure:on the November 2012 Ballot
RECOMMENDATION •
Itis recontme Ided.thaf the Council consider placing:a local sales;taz measure on the November
2012. ballotiand',direct staffto prepare-a resolution'for,consideratron and action at the Council's
August 6, 2012 meeting; or provide otherdirection to staff, as.appropnate:
f
BACKGROUND
On June:25, 2012, the City?Courttil held a`special rneeting1o:discuss'local sales tax measures
that could fund the restoration and enhancement;of city services. The Council discussed a
possible'TransienOccupancy Tax ant
ha ana local sales and use tax increase. A copy of the
June'25, 2012 'staff reportto Council is provided for-additional'background.('Attachment 1).
At the June 253, 2011nieeting,;:the inajori y ofthe Council.determtned ittdoes:not want to pursue
a Transient:Occupancy Tax increase at this time The Council is interested, however, in
determining the level of,public support for a sales and.use tax measure:before making a decision
on that option.I Given.the short.time frame between its June 25; 2012 and July 16, 2012
meetings, and the lack of funding_available for amore formal;effort, the Council indicated an
interest in"informal"polling—reaching out to groups f and individuals to determine their
preferences regarding:
• a:localisales,an rise tax -'
• whether such.a;tax'should:be a general,or special.purpose'tax
• uses;for tax proceeds
• the taxirate anti
• a sunset provision
As indicated'in the attachedrreport, and based"on current estimates:.imposing a local sales and
use;tax.of one-half percent 0%)•would generate an additional5495 million in annual revenue.
In the alternative, a one=quarter cent (:25%0) increase would net'an estimated $2,47 ,000
annually,:
Agenda ReiieN;`
City Attorney ic...„,^
r\9) _
Finance Director Cityilaanager
f
I
Regarding "special"and.` general' taxes, State Constitutional::and staturory regwrements related
to-tax-:measure and pertinent to this discussion are:found in A rtiele•XIIIC,.Sections'2,(b)'and (d)
of the State Constitution, and in California,dovetnment Code;Sections 53724 (a),and(b).
Government Code.seetion 53724(b);provides that prior to plating a measure on.tl the ballot to
impose or increasea:general tax, the ordinance:dr resolution proposing the:tax must be:approved
by a two-thirds vote of all members,of thelegislativ,e;body: However, this requirement does
not apply to•Eetaluma. Asa Charter City, Petaluma's charter_and:municipal code provisions
governing City{elections prevail over inconsistent state law. Trader'Sports,Inc. v. City of San
Leandro (20(5111 93 Cal:App 4`h`37, The.Petaluma'City Charter provides•that except as otherwise
specified inghe Charter,-all'regular and:special city elections*AO be held irr accordance with
the California:Elections Code. Section 43 of the Charter provides that affirinative votes of a
simple majority.of the Council Members present is sufficient,to pass ordinances and resolutions.
These provisions are very similar;to the San Leandro charter:and municipal code provisions
based on which•the court in Trader Sports concluded,that'the two-thirds vote.requirement was
preempted andidid not apply To-beeomereffective, a simple majonty of the,electorate must
approve the proposed.general,tax. (Cal. Cbnst Art•, XIIi€, Section 2(b).)
Government Co de Section Govt.Code§ 53724(a);prescribes no special voting requirement for
placing.a measure on the ballot,.to impose or increase-a special tax: Therefore, the ordinance or
resolution proposing the tax may b'e approved bya simple majorityvote of the legislative body
of the legislative body;members present, in accordance with section 42 of the City Charter. This
would require the vote of four members if six or'all seven ace:present, and three members.if four
or five members are present. To'then become effective, the proposed'special tax must be
approved by a kwo-thirds vote of theelectorate (Cal.'Const., Art. XIIIC,'Section.2(d),
The Attorney', office has also indicated,care should he taken"in specifying;,the uses of any
increased tax amounts, if it is the Council's intention to seekapproval of,a general tax from the
voters. fI
DISCUSSION
Following the Council's-June 25;,2012 meeting, staffcontacted the Atgus Courier to request that
they survey;:their readers'to determine interest in the,tax, The Argus was planning to:do a survey
on the subject .but lim its surveys to namore than three questions. inthis case, the questions
focused on the'size of the measure, a sunset, andiwhether'the tax shoulddbe:special+or'general
rr
purpose. Suey results are propided asAttachment2 Nearly two thirds ofrespondents did not
favor any tax increase_. Regarding a sunset, nearly three quarters of respondents favored a term
of five years or less. .lustover aitl ird favored a special purpose tax; about nineteen (19) percent
favored a general purpose tax; but forty(40)percent favored`.neither, The;total number of
respondents was_less than 80. it+should be'recogiized that tlese,surveysarenot, and are not
intended.to h4.accurate:statistical."rrepresentatibns'bfpub ie,sentiment.
Staff also requested that=the Areusindicate in an;a•ticle on the subject of the sales tax that the
Public:contaetjthe City Manager's office with:any comments theydvishedto share with the
Council. As indicated,public,feedback has been extremely limited; a total of six (6) pieces of
(0
correspondence were received,as of the writing.ofthiSireport,'five(5),of.which indicated
opposition to a sales'tax'increase: That,group of correspondence is provided;as Attachment3 to
this report.
As discussed with the'City Council at its July 2, 2012'meeting,Council member Healy organized
a poll that was conducted by polling professionals (Attachment 4). 1,2:16 Petaluma voters were
contacted and asked'how supportive'they would be for one-half, and-one-quarter percent tax
increases. These questions were related•to a general-purpose'tax. Results of this survey showed
sixty eight (68),..percent:indicatinga:moderate to high level of support for a one-half percent
increase:, This was theimost heavily favored option of the two.:Support for a one-quarter cent tax
was far less, with approximately,fourteen percent expressing either moderated or strong support
for a one quarter percent:increase. In that:category, three.quarters of:respondents indicated little
or no support for,art increase, with nearly fifty five/(55) percent expressing-no support. The
Councilritember indicated thatthis'poll providespa high degree,oistatistical accuracy, with a
variance-of approximately plus or,minus.2.2 percent.
Staff also attended the July 7, 2012 meeting of the Chamber of Commerce's Local Government
Affairs.Committee to discuss the tax measure. The;group did notspeak,for the Chamber Board
or general membership,but was;supportive ofak sales tax;measure'for a one-half percent increase.
The group felt the tax should,ber,for general purpose, and that the City Council should,be free to
allocate the proceeds:in whatever mannerit:feels,best:serves the needs of the community. They
also supported a sunset of eight-years, but felt nine could be acceptable.
Beyondrthese indicators of sentiment,,Council membersand staff have talked to various
individuals regarding the subject,;with mixed.responses that were not tabulated and cannot be
categorized as clearlyrepresenting one point of view over another:
Tithe Council wishes to pursue a sales tax increase, a special purpose tax, which would provide
guarantees to the,voters as to bow:the funds would be spent,requires a simple majority of the
Council for placement on the ballotand:a two-thirds majority voters to pass. A,general tax
provides the Council broader.spending discretion but less specificity to Voters. It also requires a
simple majority of the,Council.to:placerbefore the voters, and a-simple majority of voters to pass.
If the Council wishes'to seek'a Special: tax, it will need'to direct the uses the tax will
support. If a tax'increase is to be placed on the ballot, staff recommends that it be a general tax
with a;sunset'of at'least;eight-years. This will provide more:funding'fora variety of needs and
longer-term stability. Finally; staff recommends; with one exception.- the use'of proceeds to
finance ongoing:storm water maintenance costs. that anyproceeds from this tax be treated as
one-time,funds'. As such itis recommended that the Council give priority to replenisbing the
General;fund-reserve,,street reconstructions:and:maintenance, vehicle replacement, street light
maintenance, and dredging. In treating proceeds,as one-time.funds,,again with the one exception
Of storm:watermai tenance,;avoiding:programs that'increase staffing levels or annual recurring
costs is suggested,
The deadline for placing;a tax measure on_the November 2012'ballot;is.August 10; 2012. To
direct that a measure be placed on.the ballot, theiCouncil.needs to adopt a resolution by.August
6, 2012. With Council.-direction, a resolution to authorize placing;a..measure on the November
CI
2012 ballot, and an ordinance for consideration byctlie`votees,raddressingthe+sales and use tax
amount, term, and.whether•proceedsfwill'be:used for'generalior;specialpurposes, will be
prepared,and returned to the Council for its•consideratioii•onkAUgust 6, 2012.
FINANCIAL.IMPACTS
The estimated cost for placing.ameasure on the.November ballot ranges:from $15.;639 to°$31,277. This
is based on the County Registrar's estimate.of$.5010 $1.00,per voter: Currently there are 31,277 voters
registered in Petaluma. Costs would'.be bone!bythe General Fund, but are not currently budgeted.
t'
ATTACHMENTS
1. June 25,.20.12:Council.staff;report.
2. Sales Tax poll results from Argus Courier poll
3. Correspondence
4. Results of poll coordinated by Councilmember Healy
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