Business / Economy

2016 sales tax initiative closer to reality

County supervisors meet with the city councils of Hollister and San Juan Bautista to discuss possible revenue-generators

A special joint meeting of local elected officials was held Tuesday at the San Benito County Administration Building to discuss whether a countywide sales tax initiative should be placed on the 2016 ballot and to gain voter support. The meeting involved members of the San Benito County Board of Supervisors, the Council of San Benito County Governments (COG), and the city councils of Hollister and San Juan Bautista.

In May, supervisors had discussed putting a 1 percent tax on next year's ballot, with the hope that Hollister would repeal its current 1 percent tax (Measure E), set to expire in April 2018. In addition, COG is considering placing a tax measure targeted at local transportation projects on the ballot in late 2016. Various tax options were discussed and motions made that did not pass. Ultimately, Board of Supervisors Chairwoman Margie Barrios said at the time that the county was “running out of time if we’re going to do anything at all.” She added that as the lead agency, the county needed to take the first step before proposing any change in sales tax, so she directed County Administration Officer Ray Espinosa to schedule the joint meeting with the goal of clearing up some of the confusion about the tax-sharing implications.

Espinosa said at the June 3 joint meeting that the county staff put together different initiative strategies over the last five months. “Unfortunately, with every meeting there have been more questions asked,” he said. “So we talked with both sets of councils in Hollister and San Juan Bautista, and the county, to see what we could do concerning a sales tax initiative.”

To that end, the county hired KNN Public Finance, an Oakland-based financial advisory firm that works with counties, cities and transportation agencies, to help with the initiative and give advice on what avenues should be considered.

David Leifer, senior managing director at the firm, said he wanted to present a “framework to aid the supervisors in their discussion as they consider a joint sales tax and all the different options available to you and narrow down the conversation and to understand the different trade-offs of different strategies.”

Leifer began with a primer on the sales tax basics, explaining that there are three related taxes: taxes on retail sales, a use tax, and “the one most important to us, the ‘transaction and use tax.’”

Under the Transition and Use Tax law, no new tax can exceed 2 percent. Because of the 2 percent limit, Leifer said Hollister might have to decide to remove its current 1 percent sales tax and replace it with a new tax. “It may take an ordinance to reduce or remove the tax,” he said, “but what I don’t know yet is if the ordinance is just adopted by the city council or if it would require voter approval.”

He went on to explain, “If you decide to do a countywide tax that’s shared between the county and the cities, whether it’s 1 percent or more or the elimination of the city tax, the COG (Council of Governments, formed in 1973, by the two cities and the county for the purpose of forming consensus on regional issues facing San Benito County) can also separately pursue a transportation tax or specialty tax. They have that ability and that’s what we’re trying to do here. That’s one option.”

In all, Leifer presented four possible options:

  • Option 1 would be a countywide tax of .75 percent that would be shared between the two cities and the county, and a separate COG tax of .25 percent. This option would result in potential revenues of $1.85 million for the county; $2.36 million for the cities; and $1.4 million for COG. It would also raise Hollister’s sales tax to 9.25 percent, San Juan Bautista's to 9.25 percent, and the county's to 8.5 percent.
  • Option 2 would be a countywide tax of 1 percent with no COG tax, resulting in projected revenues of $2.5 million for the county and $3.1 million for the cities. Taxes would rise to the same levels as Option 1.
  • Option 3 would be a county unincorporated tax of .5 percent to 1 percent with no tax-sharing, and a separate COG tax. Revenues would be $1.2 to $2.5 million for the county; nothing for the cities; and $1.4 million (.25 percent) to $5.6 million (1 percent) for COG. Taxes would rise to 8.5 percent for Hollister, 8.75 to 9.50 percent for San Juan Bautista, and 8.5 to 9.25 percent for the county.
  • Option 4 would be higher than 1 percent combined increase of countywide and COG taxes; City of Hollister agrees to remove current tax. As an example, a 1.25 percent total increase would result in revenues of $1.8 million to $2.5 million for the county; $2.35 million to $3.1 million for the cities, and $1.4 million to $2.8 million for COG. Taxes would rise to 8.75 percent (with removal of the current 1 percent tax) for Hollister; 9.5 percent for San Juan Bautista; and 8.75 percent for the county.

“These are estimated revenues, but they give you an idea based on 2013 Board of Equalization retail sales within the county,” Leifer said, and then warned,  “We’re talking about two separate measures, so voters would see two measures because the county tax would have to be separate from the general tax and this may not be understood by voters.”

Leifer concluded by adding that attention must also be paid to the term lengths of any new tax — which typically range from five to 30 years — and which tax or taxes would gain voter support and meet the revenue needs of the county and cities. “It’s important to make sure that whatever monies are generated by this to make sure that whatever strategy you work towards is going to be satisfactory,” he said, adding that there should be some thought of a voter survey that could determine the feasibility of the tax initiative. 

Mary Gilbert, transportation planning manager for COG, demonstrated some of the economic numbers for California's tax revenue shortfalls regarding transportation costs. She said a 2011 statewide survey found that estimated transportation system costs from 2011 to 2020 would be $538 billion, but revenues will only amount to $242.4 billion, which is only 45 percent of what is needed. 

“Gas tax is not keeping pace,” she said, “partly because of inflation, but also because of more fuel-efficient vehicles.” She pointed out the irony that many California taxpayers understand: The result of the state’s push to control air pollution through the encouragement to drive more fuel-efficient vehicles has resulted in lower revenues from gasoline taxes. 

One possible option to increasing revenues is to become a self-help county, Gilbert said. There are 19 county transportation agencies in California that have formed the Self-Help Counties Coalition (SHCC) to develop innovative transportation solutions through voter-approved (super-majority) transportation sales tax measures to fund transit, highway, freight, bicycle, pedestrian and other mobility programs. According to SHCC, these counties provide $3 billion to $4 billion annually into the California transportation infrastructure. 

“You were a self-help county,” she said. “You passed a half-cent sales tax back in 1988. You were one of the first self-help counties in the state and you passed it with 81 percent of the voters approving it. It lasted 10 years and built four to five good-sized projects that were leveraged for state and federal transportation funds. Over $80 million in projects were completed at an annual cost per family of only $43.75.” 

When it comes to what residents want their hard-earned tax dollars to be spent on regarding transportation, she said 87 percent of respondents to a poll were keenly focused on road repairs, particularly potholes. Sixty-eight percent wanted improved transportation for seniors, youth and people with disabilities. Twenty-five percent supported the widening of highway 25. Sixty-three percent wanted improved bicycle and pedestrian safety. Fifty-eight percent wished for improved transportation to the bay area; and fifty-five percent hoped for a commuter train to Hollister. 

After the staggering amount of statistics, options and funding scenarios, Barrios asked if there were any comments. 

Anthony Botelho, District 2 supervisor, said he favored a self-help strategy to address county roads. “Road maintenance has been neglected for some time because of a lack of money,” he said. “And believe it or not, the drought has actually been a good thing because the lack of rain means the roads last longer.” He also questioned repealing Hollister’s existing 1 percent tax. 

Robert Rivas, District 3's supervisor, said he better understood the situation after the presentations and that he favored Option 3. “This issue has given me a migraine,” he said. “It’s up to us to have a strong message on how to improve the community. If voters don’t agree, it won’t pass.” 

District 5 Supervisor Jamie De La Cruz said he favored Option 1, but would strongly support COG if there is no consensus from the supervisors. “Option 1 is an opportunity for an even playing field,” he added. 

“If we rescind the 1 percent sales tax, that’s the easy part,” said Hollister Mayor Ignacio Velazquez. “The hard part is where do we go from there? We don’t want to exceed 8.5 percent. We’re a small community, not three separate communities, so it’s better if we’re looking at 8.5 percent across the board. Citizens need to understand that $20 million to $30 million in repairs won’t be possible with revenues of only $2 million a year.” 

In addressing quality of life needs, Velazquez said, “We need a new library, a community center, and things for the kids. For the community to trust what we’re saying, it’s time to step up and put tax dollars to use the right way.” 

San Juan Bautista Mayor Robert Lund said he has not been involved in discussions prior to the meeting and appreciated the information presented, but felt there was still a need for more. “I’m against repealing the 1 percent tax. If that happens, citizens won’t believe in us as elected officials,” he said. 

A common theme was the need to educate voters. “This is a tough sell,” said San Juan City Councilman Jim West, of passing any vote in San Juan Bautista. “But we have to sell this thing. If we’re specific (on where monies will be spent), I can get votes for it.” 

San Juan City Councilman Chris Martorana agreed with West. “I can’t imagine going away tonight with any kind of consensus,” he said. “The expectation is all those dollars will go to highway 25. There’s no benefit to San Juan Bautista and there’s not enough dollars in this to get our citizens excited.” 

Marty Richman, who challenged supervisors during the May meeting that they would never be able to explain the initiative to the electorate, added last night, “It costs more to repair roads in California than any other state. Whatever tax you come up with is not enough. It will be a challenge to go out and sell this to the citizens.” 

As the meeting was wrapping up, two motions were made and seconded, both favoring a COG tax of varying percentages and up to 30 years, with specific projects listed on the ballot. Velazquez opted to wait for the next Hollister City Council meeting to determine a course of action.
















John Chadwell

John Chadwell is a freelance photojournalist with additional experience as a copywriter, ghostwriter, scriptwriter, and novelist. He is a former U.S. Navy Combat Photojournalist and is an award-winning writer, having worked for magazine, newspapers, radio and television. He has a BA in Journalism and Mass Communications from Chapman University and graduate studies at USC Cinema School. John worked as a scriptwriting consultant, and his own script, "God's Club," was produced and released in 2016. He has also written eight novels, ranging from science fiction to true crime, which are sold on Amazon. To contact John Chadwell, send an email to: [email protected]