City to consider sales tax increase to balance deficit

At the Wednesday, July 17 meeting of the Scotts Valley City Council, city leaders voted to move forward with a plan that could call for a special election in November to address the city’s growing budget deficits.
Faced with an annual deficit of nearly $1.2 million — which the council members say has been exacerbated by interference from Sacramento, the council plans to ask residents to vote on a temporary half-cent sales tax increase to close the gap.
City Manager Steve Ando said that the drive for the tax increase measure was prompted by the addition of some $400,000 of former redevelopment agency obligations — mostly salaries and services — to the city’s budget following the state closure of redevelopment agencies statewide, adding to the city’s existing deficit of $800,000.
“Because of the state’s actions in doing away with the redevelopment agencies, it’s had a large impact on the city’s general fund,” Ando said.
He said that before the addition financial burden, the city had already adopted drastic measure to combat the existing deficit — including increasing the transient occupancy tax, reductions to city staff via a hiring freeze, mandatory furlough days for employees, and incentives to businesses — while waiting for the overall economy to improve. But, with the additional $400,000, the city can’t afford to wait any longer, he said.
“We could’ve managed 3 or so years more if this had not happened,” Ando said. “But this sped things up.”
The council will vote on a plan to present to voters at the Wednesday, Aug. 7 meeting, including for how long the increased taxes will be in place — most likely a 5- or 8-year window, Ando said.
Councilwoman Stephany Aguilar said that while the tax proposal would most likely pass the council’s vote as a temporary measure, she would welcome a discussion on whether the tax increase should be permanent, rather than a temporary fix.
“I don’t want a plan for a future where we’re sinking again,” Aguilar said. “(If the tax increase passed) we still would have furlough days, we would just barely float — that’s why I want to have a conversation.”
She said that other cities in the area, including Santa Cruz, Capitola, and Watsonville have adopted similar tax increases on a permanent basis as a bulwark against state encroachment.
“This is the result of the state pilfering since (the late 1990s),” Aguilar said. “We’ve lost a good $7 million, easy, to their sticky fingers.”
In Nov. 2005, Scotts Valley voters passed Measure C, a 5-year temporary sales tax that allowed the city to build its reserves. The tax expired in 2010 and a renewal was not put on the ballot at that time.
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