Commentary: Scotts Valley doesn’t need a tax increase

In 2005, when Scotts Valley faced 12 percent operating shortfalls with virtually no reserves, the city asked voters to support Measure C, a temporary five-year increase in the sales tax. I was not on the City Council then but backed Measure C because I believed there wasn’t a credible alternative and that city leaders could be trusted if they said more revenues were temporarily needed.
I firmly believe, then and now, that Measure C was necessary in 2005 — that’s why I devoted a few hundred hours to that effort as volunteer campaign manager. I feel just as strongly that a new tax increase now is both unnecessary and unwise. In this year’s council discussions, Vice Mayor Dene Bustichi, council members Donna Lind and Randy Johnson and I have all agreed that while we can’t rule out new revenues in the future, we don’t need them now.
Why? The city has about $2 to $2.5 million in general-fund reserves today (the exact amount awaits a year-end audit) compared with our 2010-11 budget of $7.846 million. Percentage-wise, that puts our reserves at the top compared with other cities in Santa Cruz County and the county itself. And that’s without counting the $3 million redevelopment agency loan repayment to the city’s general fund we can tap in the coming years.
In addition, Scotts Valley is awaiting a pending appeals court hearing in the coming months about Santa Cruz County illegally keeping millions more than its fair share of the city’s property tax revenues. When Scotts Valley won this case in superior court in 2009, the judge ordered the county to pay the city about $3 million in back revenues and $400,000 to $500,000 annually going forward. Those payments, combined with the fiscal tightfistedness we’ve shown in the past, would largely cure anything that ails the city financially for a long time to come.
Shouldn’t we at least await the appeals court ruling before saddling our families and businesses with higher new taxes?
There are other compelling reasons against new higher taxes now: The $36,500 cost for a special election to consider the tax; the new Scotts Valley Unified School District board elected in November that will need a clear field to strengthen community trust and consider its own revenue measures for early 2011 to prevent devastating education cuts; the advantage to our businesses of having the lowest sales tax in the county; the inadvisability of raising taxes when people are laid low by the worst economy in 80 years; and so on.
There’s one more argument that’s particularly resonant with me. The four current council members who worked regularly at Measure C headquarters in 2005 told voters the tax wouldn’t be extended, just as the campaign’s messaging consistently stated. I believe this refusal to extend the tax is a big part of why Measure C received 72 percent support.
Especially when we don’t need the money now because of millions in reserves, and given our proven ability to successfully deliver core services with our belts tightened a few notches, we should not go back on our word.
This last point is critical in light of other local jurisdictions’ recent failures to win required voter approval. The strong electoral support the city of Scotts Valley has historically received should not be taken for granted. This trust is precious and unusual, and it shouldn’t be put at risk when there’s nothing remotely resembling a consensus from the council or community. To do otherwise would throw away that trust for years to come, and it would not be regained easily.
Like most jurisdictions in California, Scotts Valley faces a challenging fiscal future. Continued discipline is needed, and maybe further selective cuts, to weather the storm. If the city ever faced catastrophic service cuts — something we do not face now — I believe the council and community would embrace consensus alternatives, as we did with Measure C.
But especially with today’s economy, millions in reserves and the possible financial windfall the pending appeals court hearing could soon bring, now is not the time for a new tax increase.
Jim Reed is mayor of Scotts Valley and has been a member of the City Council since January 2007.