Time to tax?
Chico chamber announces support of sales tax measure
Former City Manager Tom Lando has had a vision for Chico for at least the past eight years that includes a long list of things to fix, and the way to get there keeps coming back to one thing: a local tax increase.
In 2011, Lando advocated with a group of community leaders for a sales-tax increase to fund police staffing, high school sports and arts, library operations and street maintenance, according to CN&R archives. Ultimately, the group didn’t feel confident enough voters would support it and abandoned the effort.
Shortly thereafter, the city was in a desperate position with the economic downturn and loss of redevelopment agency funding, quickly followed by a multimillion-dollar budget gap, depletion of reserves, layoffs and a general fund deficit.
Now, Lando is part of another effort that has the backing of the Chico Chamber of Commerce. At its annual Business Summit Friday (Jan. 26), the chamber released a special report announcing its support for a “revenue measure” to fund “business and community priorities,” like increasing police staffing and improving roads.
The current City Council and staff have done an excellent job, Lando said, bringing the city out of a deficit and building reserves. But as pension costs skyrocket, property crime rates rise and roads crumble, Chico is struggling to keep up.
“Our community can do better and should do better and wants to do better,” he said. “I don’t see the ability without additional revenue to accomplish that.”
Lando was chairman of the chamber’s task force on city revenues and expenditures, which generated the report. A preliminary idea discussed by the group was a half-cent sales-tax increase—half going to a bond for roads and half to ongoing operations for public safety, he said.
“For me, and I know some people disagree with this, it’s a relatively minor change to what people pay that would generate a very large amount of revenue,” he said. “Our roads are in deplorable condition … and we need to fix them.”
Local sales tax measures like Measure C, the half-cent sales tax narrowly passed by Paradise voters in 2014, can be approved by a majority 50 percent plus one vote. If they are earmarked for a specific fund or use, a two-thirds vote is required.
Chamber CEO Katie Simmons sees a potential revenue measure as the start of a conversation, and not something to rush to get on this year’s ballot. The chamber has heard from its members and the business community, which have expressed they may be in favor of a tax in return for a safer community and better roads.
Now the chamber has to bring the idea to the larger community, to see what it thinks.
Along with funding roadwork, the chamber is recommending hiring 17 more officers, which would bring the department to 112, to create specialized units and reduce crime, and fund a new dispatch radio system, based on input from Police Chief Mike O’Brien. According to the task force report, the city should explore a county-wide fire district, and approach pensions through ongoing conversation with California Public Employees’ Retirement System, with potential staff compensation reductions, fixed salary reductions, frozen step increases or contracting for more services.
Councilman Randall Stone isn’t sold on a tax solving Chico’s financial problems. The city has a spending problem, he says.
“Injecting it with cash just ignores the new realities,” he said. “Our entire cost of doing business, salaries and benefits, doubles every 10 years. There is no sales tax measure, no property tax measure that can possibly get you out of that tail spin. It’s simple math; it’s not hard.”
Increasing interest rates, a robust stock market, rising minimum wage and an expensive federal tax cut that will be paid for five years from now are all factors, and will impact inflation, he said. “It’s the worst time” to implement a sales tax. He views it as a cash grab: The police department is fully staffed, the highest paid it has ever been and the only department to receive raises in the last five years.
Stone said he cannot recall a sales tax measure he’s supported, in part because they hit the lowest-income folks disproportionately. Poor families pay almost eight times more of their incomes in consumption taxes than the best-off families, and middle-income families pay more than five times the rate of the wealthy, according to a 2015 report by the Institute on Taxation & Economic Policy.
People have a healthy skepticism about raising taxes and giving the city the opportunity to spend more, Simmons said, because of the city’s descent into debt and layoffs following the recession. That’s why dedicating the funds to a particular use is important, she said. The chamber has thought and talked about the nature of sales taxes, and that’s why its members believe the public needs to engage in conversation, she added.
The million-dollar question: Will there be public buy-in?