Should the city of Seal Beach raise the city’s sales tax by 1 percent? That’s a question voters in Seal Beach will answer on November 6, 2018.
At its July 23 meeting, the Seal Beach City Council voted unanimously to approve placing a measure on the November ballot that would raise the city’s sales tax rate from 7.75 percent to 8.75 percent.
That amounts to an increase of 1 cent for every taxable dollar spent.
City of Seal Beach Finance Director/Treasurer Victoria Beatley described the sales tax hike as “the most equitable way to generate revenue” since both visitors and residents will pay for the increase.
If passed, the measure could raise an estimated $5 million annually for the city, according to the staff report presented to City Council.
The extra $5 million could be a huge boost of ongoing revenue for the city which already enacted service cuts and increased fees when it adopted a budget for this fiscal year with a $400,000 deficit.
At Monday’s meeting, Beatley attributed some of the city’s current financial challenges to the increasing cost for the Orange County Fire Authority contract, rising retiree health costs, pension costs and insurance costs.
After the meeting, Beatley suggested money generated from the increased sales tax could potentially pay for restoring services, such as grooming of the beach and cleaning of public buildings, filling vacant positions, such as the Director of Community Development and hiring new police officers.
“The quality of life in Seal Beach is of the utmost importance and passage of the sales tax would give the City the ability to hire more police officers to combat crime,” Beatley wrote in an email on Tuesday. “It would also allow us to continue to provide a high level of City services and programs to which residents have become accustomed.”
“My residents don’t feel safe and this is to hire more cops,” District One Councilwoman Ellery Deaton said during Monday night’s discussion about the sales tax measure. She asked Interim Police Chief Joe Miller to estimate how many officers he thinks the Seal Beach Police Department needs.
“I’m uncomfortable to provide a number before the Police Services Study is back,” Chief Miller responded. The study is currently being conducted by an outside consultant to look at the staffing needs of the department.
Later, while City Council was brainstorming budget scenarios, Chief Miller suggested looking at what it would cost to hire nine more officers.
New sales tax impact revenue estimate
The $5 million estimate for revenue from the one percent sales tax hike is higher than the “back-of-the-envelope” estimate of $3.6 million made at the June 11 council meeting.
Beatley explained the higher estimate is because of some positive adjustments to how sales tax is calculated that were uncovered by an analysis conducted by HdL, a consultant that looks at sales tax for the city.
The adjustments include how sales tax is calculated for transactions involving Seal Beach residents’ car purchases, delivery of business and construction materials inside the city and delivery of industrial supplies for businesses in the city, Beatley explained.
“I was surprised by the estimate that was prepared by HdL,” Beatley said.
During public comments, Seal Beach resident Robert Goldberg also expressed shock at the $5 million estimate. He didn’t question the accuracy of the figure but questioned why the staff report didn’t explain how staff got to $5 million from the $3.6 million figure and didn’t give the option of going with a smaller sales tax hike.
He thought the council should postpone the vote and hold a special meeting to consider going with a three-quarters of a percent sales tax hike, which he said he could support and promote.
During discussion on the matter, City Council members did look at raising the sales tax by both one percent and three-quarters of a percent. During this exercise, council members and city staff utilized a new financial forecasting model that was unveiled at the start of Monday’s council meeting. Beatley called it an “Excel spreadsheet on steroids.”
Council members were able to plug in numbers and estimates to compare how raising the sales tax by one percent versus three-quarters of a percent would impact the city’s budget. The results were instantly calculated for council members to see on a large screen.
Beatley addressed the idea of going with a three-quarters of a percent versus one percent and said, “The reality is that this is an opportunity, potentially, for consideration tonight, to go out to voters and to go out one time and know what the future is going to look like rather than going out three quarters and then having to come back in another couple of years and ask for, you know, the additional [money].”
Residents speak out about sales tax
During the public comment portion of Monday’s meeting, residents expressed their views on the proposed sales tax increase.
Old Town resident Tim Prangley said he would “fully support” a sales tax increase and pointed to his desire to use the money to hire more police officers. “We need the money and we need it now,” he said.
Seal Beach Chamber of Commerce President Scott Levitt announced the Chamber’s official position would be to oppose the sales tax hike measure. “As a business owner, of course, it’s hard to see the benefit of raising the sales tax on every single product that you sell,” Levitt said. He noted that many of the members of the Chamber are business owners in Seal Beach but not residents and, therefore, won’t be able to vote on the measure.
After speaking about the city’s budget problems, Seal Beach resident Jim Brady urged council members to vote unanimously to put the sales tax increase on the November ballot. “What’s the downside of voting in favor of putting the measure on the ballot?” he asked council members. “Let the residents vote and decide what they want for our city.”
You can view the proposed ballot measure on the City’s website here https://bit.ly/2NImwut.
