On Monday, the Lafayette City Council will consider placing a sales tax measure on the November 5 ballot.
The current sales tax in Lafayette is 8.75% and is one of the lowest rates in Contra Costa County. The city’s sales tax consult projects that a ½ cent local increase will generate $2.4 million annually while a 1% tax would raise $4.7 million each year.
After months of will they or wont they, the council now will make a decision to increase the local sales tax in the City of Lafayette as the city faces a 10% annual structural deficit of over $2 million.
If the city opts not to place a sales tax measure on the ballot, it would then trigger staff to return a budget resulting in 10% reduction in general funds and expenditures across all departments.
According to the city, the deficit is due to increased inflation, rising costs for insurance, additional costs for infrastructure maintenance, and more state laws and mandates which increase local government administrative and financial burdens.
The city says the budget’s 5-year model anticipates that the City will likely have a deficit of more than $2M annually and be unable to maintain the 60% General Fund reserve goal in future years.
In response, the City froze four open positions and allocated ARPA funds to bridge the gap through FY24-25
The staff report also says, the deficit in the 5-year model only accounts for basic, ongoing operations and does not include additional funds that are necessary to enhance neighborhood wildfire preparedness, keep up with inflation, prepare for unexpected financial downturns, repair the City’s aging Community Center and other facilities, create parks in the downtown, enhance traffic safety, or embark on any other projects that residents may desire.
Discussion
Information from the most recent survey found that a ½% sales tax is likely to pass with a calculated favorability of 55.5%, well over the 50% threshold. A ½% tax would avoid cuts for basic services but leave little room to accommodate any other programs, policies or projects such as traffic safety – which 77% of residents list as important — and maintenance for infrastructure including the Community Center, pathways, parks and trails.
While passage of a 1% sales tax is possible according to the poll, it is less likely — with at most a 2% margin over the necessary threshold — so it is a riskier option. However, a 1% tax would allow the Council to both hedge against inflation and future economic downturns, pursue additional programs including those mentioned above as well as enhance wildfire preparedness in the neighborhoods – which 87% of residents indicate is of great concern.
If the Council opts to put a sales tax measure on the ballot, the tracking poll results indicate that the tax should sunset and should include a citizen’s oversight committee
Property Tax Percentages
City did look at other options;
- The Subcommittee considered raising fees, but this would only cover at most 10% of the needed revenues
- The Subcommittee also looked at a parcel tax or an ad valorem property tax and determined that it would cost on average $200 per parcel to fully cover just the deficit and that the likelihood of voters passing such a tax might be difficult given current property tax levels.
- On the other hand, sales tax is partially be paid by visitors who dine and shop in Lafayette, not just residents and Lafayette’s current sales tax is lower than Moraga, Orinda, Walnut Creek, Concord and Pleasant Hill
Response to budget issues:
As part of approving the FY24/25 budget, the Council decided to:
- freeze the hiring for four approved staff positions,
- utilize remaining one-time ARPA funds to bridge the deficit through FY24-25
- forgo adding any new tasks or projects to the current workload,
- delay making immediate cuts that would impact core services such as the number of police officers, street and drain maintenance, support for senior services, the Chamber of Commerce and other community partners while they considered a potential ballot measure
Duration: The duration of the proposed tax needs to be defined. Information from the most recent survey found that a permanent sales tax increase was not popular among Lafayette voters. The latest poll indicates that 73% of voters are likely to support a 7-year ‘Sunset Clause’ compared to 54% support for a 10-year period. A 7-year ‘Sunset Clause’ means the measure would terminate 7 years after going into effect unless renewed by the voters.
Citizens Oversight Committee: It is common among other cities that have a local sales tax to establish an independent citizen oversight committee to reassure voters that the revenue is spent as promised. For example, the City could establish an advisory Citizens Oversight Committee tasked with meeting a few times annually to review the use of the revenue to ensure all funds are spent responsibly on general services consistent with community priorities. 62% of voters indicated they would be more likely to vote for a measure if it includes a citizen’s oversight committee.
- Staff Report — click here
- Budget overview Video – Watch (32 min)
Previous Stories:
- June 10 – Lafayette Set to Talk Budget, Possible Sales Tax
- May 30 – Sales Tax Measure Being Considered for Lafayette
- April 29 – Lafayette Says Road Repair Costs Increased by 33%
- March 11 – Lafayette Looks to Sales Tax Increase to Fix Budget Deficit
