Voters in Seal Beach could be asked to raise the city’s sales tax by one percent this November.
Faced with what city officials have called a “structural deficit,” the city of Seal Beach will consider putting the sales tax hike, from 7.75 percent to 8.75 percent, on the November 6, 2018 ballot. The Seal Beach City Council is expected to vote on whether to approve placing the sales tax increase on the ballot at its meeting this Monday, July 23.
The measure could raise $3.6 million for the city, according to a “back-of-the-envelope” estimate from City of Seal Beach Finance Director/Treasurer Victoria Beatley during the June 11 city council meeting.
Why is the city proposing
a sales tax hike?
“A recommendation such as this is not taken lightly or made cavalierly,” Beatley wrote in an email last week that also emphasized the city’s budget challenges. “Revenues have not kept up with inflation and some costs to the City have increased well beyond inflation levels as well,” Beatley wrote and later added, “In order to meet the expectations of the businesses, residents, and visitors in Seal Beach additional revenue is required to pay the City’s obligations.”
City leaders point to the rising price for the city’s contract with the Orange County Fire Authority, increasing pension, insurance, and retiree health costs coupled with flat sales tax revenue and dropping utility users’ tax revenue as the main reasons for the current budget problems. The budget problems were stressed when the city council adopted its 2018-2019 fiscal year budget with a nearly $400,000 deficit for the General Operating Fund budget of about $30 million. That was after cutting costs, including the elimination of $100,000 in discretionary funds for council members, raising fees, such as the parking sticker fee, and reducing services, which included cuts in the city’s senior transportation program and a reduction in tree trimming and machine grooming of the beach.
“The increasing structural deficit left unchecked will jeopardize the City’s future significantly,” City Manager Jill Ingram wrote in her letter prefacing the adopted budget.
The budget was adopted unanimously at the June 11 city council meeting. At that meeting, Beatley suggested $4 million as an estimate of the city’s “structural deficit” or what it would cost for the city to be “fully staffed.”
For what would the sales tax
hike pay?
In a recent email, Beatley wrote the increased sales tax revenue from a one percent increase “would allow us to fill key positions that have been held vacant, fund vehicle replacement, maintain services levels, maintain infrastructure, both facilities and streets/roads/storm drains, etc. and on-going increasing operational costs.” In the past, Beatley suggested the measure could be presented as a tax increase solely to fund public safety including the Seal Beach Police Department, Marine Safety Department, and Orange County Fire Authority.
Interim Police Chief Joe Miller has been pushing for more funding to hire more officers amid a jump in some types of crime in Seal Beach. Right now, there are 33 officers on the force.
The department is recruiting to fill two additional positions that would be funded for the first year through a loan from the city’s designated swimming pool fund.
“We need to ask people: do we want more public safety?” District One Councilwoman Ellery Deaton brought up during discussion of the sales tax increase at the June 11 city council meeting. Beatley would not say if the measure would be designated strictly for public safety and wrote in an email “The staff report will answer this question.” The staff report for Monday’s meeting should be made public today, Thursday, July 19.
If the ballot measure designates funding specifically for public safety, then it would be considered a “special tax” and would require approval of two-thirds of voters, according to City Attorney Craig Steele.
Business community reaction
“I understand the need and reasoning of the proposed one-percent [increase] and, if passed, I hope it is small enough most people don’t notice it,” Colvin English, co-owner of Jennings & Allen store on Main Street, wrote in an email last week. “We don’t often hear anyone comment in our store on the current rate other than to note it is less than Long Beach.” (Long Beach has a tax rate of 10.25 percent.)
“I think it’s necessary to have taxes to keep a city running but there’s always a concern about impacting businesses as we are competing with online buying,” said Lisa McHenry, owner of knock knock Toys and Gifts on Main Street.
Sales tax revenue, usually a large source of revenue for the city, has been flat in recent years and the popularity of online shopping has been blamed.
In a report in The Sun last week, Marah Fineberg-Kuck, vice president of the Seal Beach Chamber of Commerce, suggested the Chamber “will oppose” the one percent sales tax hike, but she cautioned it has not made a final decision.
Public response
Residents are also weighing in on the proposal. Around 30 people responded to a question the Sun posted on Nextdoor.com on Sunday and there was a range of opinions on the potential sales tax hike.
Some were adamant about rejecting any attempt to raise taxes. “Taxes and fees are already too high!” wrote Mona Lewis of Leisure World. “100% absolutely NOT!!,” wrote Leo Varshavsky.
“Until my social security check starts to increase, I am opposed to any more taxes for any reason!” wrote Cathy Carey and added, “Time to start shopping in Huntington Beach if that happens.”
Neighboring areas with a 7.75 percent sales tax rate include Huntington Beach, Los Alamitos and Rossmoor while Westminster has a sales tax rate of 8.75 percent.
“I am very disappointed in the proposal for higher sales tax,” wrote Sharon Hamel, who said she’s lived in town for 38 years. She was also one of many people to express frustration with city leaders.
Enea Ostrich of College Park East wrote, “If the budget is a mess, we shouldn’t have to bail it out with more money.” While Scott Weir wrote, “Terrible idea to raise taxes! Manage the city better is the solution.”
“Everyone is complaining, but nobody is offering solutions,” responded Bret Colson. He suggested the city enact a wage and hiring freeze and try to attract more businesses to town.
Others agreed that while tax increases are unpopular, they understood why they can be necessary. “As you know, nobody likes an increase in any taxes but the City has no other way of addressing the budget deficit,” Old Town resident Jim Brady wrote in a three-page response on the issue. Brady also wrote that while he’s usually opposed to tax increases, he believes the sales tax increase is the only way to help pay for more police officers in town. He suggested the sales tax increase would be offset if Proposition 6, the repeal of the gas tax, is successful. “Many of us understand that to keep our little city safe, we need increased services and that costs money,” wrote Polly Cross of College Park West who also noted that visitors would share in the cost. “An increase in sales tax is an easy fix and is carried not only by residents, but by anyone who visits Seal Beach to shop or dine,” Cross wrote.
Steven Stasoiski brought up the potential for other money sources, such as oil revenue, which could be reconsidered by City Council. He ended his comment with this: “If after all, a sales tax is added to the ballot, then I hope residents and businesses will be provided enough information to weigh the benefits against the costs.”
Bridgeport resident, and longtime budget watcher, Robert Goldberg didn’t offer an opinion on the sales tax proposal but said based on his number crunching he thought a one cent sales tax increase could bring the total number of officers on the Seal Beach Police force to 37 and would “allow the City to put several million dollars “in the bank” to rebuild our savings (“reserves”) back to recommended levels.”
Before qualifying for the November ballot, the measure needs to be approved by city council, then reviewed by the city attorney for an impartial analysis, direct arguments may be submitted and these documents are subject to public review before they are submitted to the Orange County Registrar of Voters by an Aug. 10 deadline, according to City Clerk Robin Roberts.
