MEETING DATE:
JULY 9, 2024
SUBJECT:
Title
RESOLUTION NO. 2024-9322 - PLACING A GENERAL TAX MEASURE ON THE NOVEMBER 5, 2024 GENERAL MUNICIPAL ELECTION BALLOT TO ESTABLISH A 1 PERCENT GENERAL TRANSACTIONS AND USE (SALES) TAX
Body
Recommendation
Recommendation
ADOPT the following:
A. Ordinance of the City of San Marcos amending Title 3, adding Chapter 3.22 of the San Marcos Municipal Code to establish a temporary one cent general transactions and use tax to be administered by the California Department of Tax and Fee Administration. (First Reading) (4/5 vote required)
B. Resolution of the City Council of the City of San Marcos amending Resolution No. 2024-9511 and calling for the placement of a general tax measure on the ballot for the November 5, 2024 General Municipal Election for the submission to the qualified voters of an ordinance to enact a General Transactions and Use Tax at the rate of one percent (1%) (4/5 vote required).
Body
Board or Commission Action
Not Applicable
Relevant Council Strategic Theme
Planning for the Future
Good Governance
Executive Summary
The City of San Marcos, like many cities throughout the country, struggles to repair and/or replace its aging infrastructure. This item presents a formal ballot measure for City Council consideration for placement on the November 5, 2024 statewide election ballot to allow the City to continue to address additional high priority needs. The measure is for the adoption of a temporary (ten-year) one percent transactions and use tax measure (the "Measure"). Although the City's most pressing need is infrastructure improvement, repair and maintenance, the tax is a general tax which can be spent for any lawful purpose of the City.
Discussion
Staff recommends adoption of a one cent general transactions and use (sales) tax to allow the City to address items of community concern. Examples of such items include, but would not be limited to, the following:
• Fixing potholes and paving and maintaining local streets.
• Keeping local parks, trails, sports fields, playground and community facilities safe, clean and well-maintained.
• Addressing homeless encampments and increasing cleanup efforts.
• Repairing or replacing aging underground stormwater pipes that are at risk of collapse and creating sinkholes.
• Repairing infrastructure including sidewalks, curbs, and storm drains.
• Cleaning up trash and litter along streets, sidewalks and in other public areas.
• Making improvements to roads and intersections to better manage traffic congestion on City streets.
• Provide fire protection and paramedic services and facilities.
• Maintain and enhance quick response times for 9-1-1 emergencies.
While a general use tax cannot approve a specific list of projects, community feedback has provided types of critical and emerging needs that could be addressed with such a measure. As a general tax, the approval requirement is a simple majority (50%+1) of voters. It is recommended that a Citizen Oversight Committee be formed to ensure public confidence in the use of the funds.
The Citizen Oversight Committee is an effective way to guide the expenditure of the funds throughout the life of the Measure. The Citizen Oversight Committee would serve in an advisory capacity. In particular, the Committee members will review the Independent Auditors' Report on revenues and expenditures and present an annual report to the City Council with findings relative to the use of Measure's funds. The Mayor and City Council shall appoint all members of the Committee. It is highly desirable that members of the Committee have accounting, finance, engineering or experience in a related discipline (including construction), but not required. The members will be residents or representatives of businesses located within the City of San Marcos and shall not be elected officials or current City employees. While the Citizen Oversight Committee would not have budget authority, it would be a public body governed by the Brown Act, which requires open public meetings, properly noticed and posted agendas, and reports and minutes.
The clear accounting of additional revenue and resulting expenditures is key to transparency. Revenue from the sales tax Measure is a general tax and shall be realized in the General Fund in a separate line item (i.e. Sales Tax - Measure ____). In order to provide greater transparency, these funds will then be transferred to a fund established for the Measure where all transactions will be accounted for in accordance with generally accepted accounting principles (GAAP).
If the Measure is approved by the voters, prior to the City Council consideration of the City's annual budget, staff will prepare and present to the Citizen Oversight Committee a spending plan for the Measures revenues. Such plan shall include specific proposals for near term expenditures, a plan for expenditures throughout the 10-year term of the tax, and finance options for larger scale projects. After review by the Committee, the spending plan will be incorporated into the City Manager's proposed budget for consideration as part of the City's annual budget process.
The sales tax rate currently applied in the City of San Marcos is 7.75%. This includes a combined statewide amount of 7.25%, a San Diego County district tax of 0.50% for the TransNet program. Of the total 7.75% collected, the City receives 1%. Pursuant to California Revenue and Taxation Code Section 7251.1, the combined rate of all taxes imposed in any county (above the statewide tax rate) may not exceed 2%. Adopting a general-purpose tax of one percent (1%) for 10 years is projected to generate an estimated $200 million in additional revenues over the life of the Measure; with actual revenues determined by economic conditions. Also pursuant to California Revenue and Taxation Code, food items (groceries), prescriptions, certain medical devices, and other "Necessities of Life" items are exempt from sales tax (see Sections 6006, 6010, 6016, 6018, 6353, 6358, 6359, 6363, 6364, 6365, 6366, 6370, 6371, 6373, 6408, and 6409). If approved by the voters, the tax would become effective April 1, 2025 and would remain in effect until March 31, 2035.
The ballot language to be presented to the voters is as follows:
To provide funding for San Marcos city services, such as fixing potholes, maintaining streets/public infrastructure; reducing traffic congestion; keeping local parks, trails, playgrounds, and community facilities safe, and well-maintained; providing fire protection, paramedic, crime prevention, and 911 emergency response; shall the City of San Marcos measure establishing a 1 cent sales tax be adopted, providing approximately $20,000,000 annually for general government use for 10 years, with citizen oversight, independent audits, and all money locally controlled?”
The revenue from this Measure would be paid in addition to the existing sales tax and would be collected at the same time and in the same manner as the existing sales tax except as to vehicle sales, which are taxed based on where the vehicle will be used, rather than where it is sold. This avoids creating a competitive disadvantage for car and other vehicle dealers in cities with local sales taxes. As with the existing tax, the new revenue would be collected by the California Department of Tax and Fee Administration, however all revenue generated would be dedicated to San Marcos and could not be diverted to the state or other agencies. Because the Measure is a proposed "general tax", the revenues would go into the City's General Fund and could be used for any legal municipal purpose. City staff recommends a general use sales tax measure to address general asset management needs, including infrastructure and associated staffing to maintain a safe and clean community.
Process
The California Revenue and Taxation code authorizes the levy of a transactions and use tax (a sales tax or ‘district' tax) by any county, city, city and county, or any other governmental agency.
In order to proceed, pursuant to California Revenue and Taxation Code Section 7285.9 and other applicable state law, the City Council must first enact an ordinance amending Title 3, adding Chapter 3.22, of the San Marcos Municipal Code entitled "San Marcos One Cent Sales Tax," a temporary (ten year) general transactions and use tax.
The next step is adoption of a resolution amending Resolution No. 2024-9511 calling a general municipal election to be held on Tuesday, November 5, 2024, and ordering the submission of a proposition to the voters at said election, to consider approval of the ordinance. If approved, the ordinance would establish a transactions and use (sales) tax at the rate of one percent (1%) of the gross receipts of any retailer from the sale of all tangible personal property sold in the City through March 31, 2035.
Ballot Arguments
California Elections Code Section 9282 allows the legislative body, any member or members of the legislative body authorized by that body, any individual voter who is eligible to vote on the Measure, or bona fide association of citizens, or any combination of voters and associations, to submit an argument for or against a measure placed on the ballot by the legislative body. Arguments may not exceed 300 words in length and must be submitted to the City Clerk no later than August 15, 2024. The action tonight allows the Council to appoint any member(s) to submit arguments in favor of the Measure, on behalf of the City Council. Should the Council not wish to make such an appointment, the resolution may be amended at the meeting to remove that provision.
In accordance with Elections Code Section 9285, rebuttal arguments may not exceed 250 words and must be submitted to the City Clerk no later than August 20, 2024.
Environmental Review
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines. Therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. Notwithstanding the foregoing, the activity qualifies for an Exemption pursuant to Section 15061(b)(3) of the California Environmental Quality Act State Guidelines.
Fiscal Impact
The City’s sales tax consultant, HdL Companies, estimated that a one-cent transactions and use (sales) tax could generate $200 million in additional revenues over the proposed 10-year life of the measure, with actual revenues determined by economic conditions. If the measure is passed in the general municipal election to be held on Tuesday, November 5, 2024, preparatory costs and ongoing administration costs will be charged by the California Department of Tax and Fee Administration.
Attachment(s)
1. Resolution Placing the Measure on the Ballot, including Ordinance text
2. Letters of Support
Prepared by: Donna Apar, Finance Director
Reviewed by: Helen Holmes Peak, City Manager
Approved by: Michelle Bender, City Manager