Tired of Service Cuts, California Cities Raise Taxes

Have cities reached the limit when it comes to cutting services? That seems to be the case in California where voters passed 71 percent of local tax and bond measures, according to Michael Coleman, fiscal policy advisor for the League of California Cities. Dig a little deeper and you will find that 80 percent of city general tax measures passed on election night.

The general tax measures are sales tax authorizations for the most part, some of which passed with 60 percent and 70 percent of the vote. Coleman attributes the high pass rate to the fact that “voters can usually connect the direct consequences of the passage or failure of a tax measure to specific public services.”

Take Sacramento, the state’s capital. Since 2008, the city’s police department has lost more than 300 officers and civilian staff and 30 percent of its budget, as local officials slashed services in the face of an ongoing budget crisis, according to the New York Times. With crime rising fast (the city saw a 48 percent increase in gun violence this year), voters responded by passing a half-cent increase in the sales tax to 8.25 percent. The next day, Sacramento City Councilman Darrell Fong told the Associated Press that voters sent city leaders a mandate to restore critical city services. The tax increase will raise $28 million.

While the high pass rate of local tax measures may seem natural in liberal state such as California, other more conservative localities in Alabama, Oklahoma and Ohio passed a number of revenue measures, according to AP. But California stands out with 171 cities and counties passing tax and bond measures.

The willingness of cities to embrace tax increases comes on the heels of six straight years of declining revenue, according to the National League of Cities. “Cities are making personnel cuts, delaying or canceling infrastructure projects and cutting
local services,” according to NLC’s 27th annual City Fiscal Conditions report, released in September. Costs for health care, pensions and infrastructure are increasing while property tax revenues are projected to fall for the third year in the row.

 For California cities, hit especially hard by declining property values and home foreclosures, increasing the sales tax has become one of the few options left to boost city revenue (other measures that passed include taxes on hotels, businesses, utilities and land parcels).  But Coleman warns that some California cities may be reaching their limit when it comes to the sales tax increases. “It’s getting very high—10 percent—for some cities,” he says. But it’s the one tax that’s easy to pass, he adds. City leaders have become adept at giving voters transparency and trust on how the money will be used. “You need a constituency that believes the tax is necessary,” says Coleman. And for a broad swath of urban California, that seems to be the case.

Email tnewcombe@governing.com