FROM:
David P. Donery, Town Manager, Jeff Zuba, Finance and Administrative Services Director, Sean Condry, Public Works Director
SUBJECT:
title
Consider Potential Next Steps for Renewal of Measure D Transactions and Use Tax
end
RECOMMENDATION
recommendation
Staff recommends that the Council receive a report regarding options for the renewal of the Measure D transactions and use tax and authorize the Town Manager to hire a tax measure consultant and to conduct public opinion polling. Staff further recommends that the Council consider utilizing an ad hoc subcommittee of the Council to work with staff on developing options for the full Council to consider.
bodyBACKGROUND
In 2012, the Town Council conducted a survey of the community that prioritized 33 goals established as part of a Council goal-setting process. The results of this survey showed the top priority to be the repair of the Town’s roads.
As a result of the community survey, the Town Council created a Financial Advisory Committee tasked with evaluating the Town’s budget and making recommendations to the Town Council. The primary result of the work of the Financial Advisory Committee was to recommend that the Town put forth a measure that would raise money for the repair of the Town’s road and drainage systems. This recommendation is summarized in the group’s final report from May of 2013 (Attachment 1).
The Town Council voted to put Measure D on the November 2013 General Elections ballot. The measure asked voters to consider approving a 0.5% transactions and use tax for a period of 10 years, with revenues coming directly to the Town of San Anselmo. Measure D passed with 69.92% of the vote. The Council emphasized that the funds would be prioritized for use in fixing the roads.
DISCUSSION
The statewide base sales tax rate is 7.25%. Of this rate, 1.25% is known as the Bradley-Burns Sales Tax. Under Bradley-Burns, local jurisdictions receive 1% of sales tax generated from purchases made on taxable items within their jurisdictions for use at their discretion. The remaining .25% is allocated for county local transportation funds (LTF’s). The remaining statewide sales tax revenue goes into the State’s general fund (3.9375%), County Realignment (1.5625%) and Prop 172 (0.5%).
In most areas of California, local counties, cities, and towns have added taxes that increase the local sales tax rate. The maximum tax rate is 9.25% in any district (without voter approval to go above the cap). Many cities and counties in the state have additional tax rates ranging from 0.125% to 1.00%. Some areas may have more than one district tax in effect. For example, in Marin County, there are three countywide district taxes: Transportation Authority of Marin (0.5%), SMRT - SMART in Marin (0.25%), and the Marin Parks/Open Space/Farmland Preservation Transaction and Use tax (0.25%). In San Anselmo, Measure D adds 0.5% to this list for a total of 8.75%.
The Town began receiving revenues from Measure D in 2014 and will continue to receive these funds through March 31, 2024. As demonstrated in Table 1, these revenues fluctuate based on local consumer spending and are subject to fluctuation in years where large purchases are made by residents as seen in 2017 and 2021. For the fiscal year ending June 30, 2021, Measure D generated 91% of the Town’s annual sales tax revenue.
Table 1
|
Sales Tax - Measure D |
|
For year end June 30, |
Sales Tax - Measure D Revenue |
|
2021 |
$1,121,467 |
|
2020 |
$948,953 |
|
2019 |
$1,011,996 |
|
2018 |
$887,475 |
|
2017 |
$1,132,321 |
|
2016 |
$835,678 |
|
2015 |
$804,946 |
|
2014 |
$112,451 |
Measure D Funding - Results
The Capital Program Monitoring Committee was re-established in March of 2014 by the Town Council. The purpose of the committee is two-fold; to monitor the implementation of the Town’s capital improvement program, and to provide oversight to the voter-approved Measure D sales tax funds as required by the measure.
The Committee’s charge is to hold an annual meeting summarizing the progress of capital improvement projects funded by Measure D, as well as capital improvement projects funded by other sources of Town funding.
Since 2014, Measure D funding has resulted in a long list of improvements to the Town’s roads and infrastructure. With Measure D funds the Town has paved over 46 streets and has slurry sealed over 60 streets, or approximately 21 lane miles of paving and 14 lane miles of slurry seal. Additionally, Measure D funds were used for the local match portion for many grant projects including 6 bridge replacement projects, a bridge preventative maintenance project, sidewalk improvement projects around schools, the current federally-funded Sir Francis Drake paving project (from the Hub to Bolinas Avenue), and the Low Impact Development project, which included the Magnolia Avenue Parking Lot. Without Measure D, the Town’s ability to leverage local funds to get grants for paving, sidewalks, bridges, flood control projects, etc. would be drastically impaired.
Since the passage of Measure D, the Town has increased its pavement condition index score from the mid 50’s to 68 (out of 100). Achieving a pavement condition index of 70 is considered a success, especially if it can be maintained. Therefore, with the rising costs of construction and continued long term maintenance costs, the Town must have funds available if it wishes to not only maintain, but improve the condition of its roads. The better the roads are, the cheaper it is to maintain them, so it is imperative to keep investing in protecting the Town’s good roads with slurry seals, while paving/rehabilitating the roads that are in poor condition. Without sufficient funding to maintain the street network, the Town’s roads will deteriorate to the point of needing complete reconstruction, which is exponentially more expensive than maintaining them in good condition.
ANALYSIS
Sales Tax vs. Transactions & Use Tax
The Bradley-Burns Sales Tax is revenue generated by the Town based on where the sale or order is placed or negotiated and under state law, this sales tax cannot exceed 1%. In addition, the Transactions and Use Tax Law allows cities, counties and certain special districts to levy transactions and use taxes at a rate of .125% or multiples of that rate. These taxes are distinct from Bradley-Burns sales taxes, because they are distributed to the jurisdiction where the goods are delivered. Measure D is a transactions and use tax.
By way of illustration, consider the purchase of a vehicle by a Town resident. The resident would pay sales tax in the jurisdiction where the vehicle is purchased but also pay a Measure D transactions and use tax to the Town, because the vehicle is registered here. The transactions and use tax brings in revenue from industry groups that don’t have a large presence in the Town, including automobile and building (building materials).
Special vs. General Tax Measure
In California a general tax, one that is to be used for general governmental purposes, requires a 50% plus one majority vote. A special tax, one that is to be used for a specified purpose, such as the Town’s Library Parcel Tax, requires a 66.67% super-majority vote. The philosophy behind this rule appears to be that it is much more difficult to obtain voter approval on a measure that does not specify how the tax money will be used, thus the 50% plus one majority requirement. However, rules governing the ballot language for a general tax allow for some specificity of the jurisdiction’s intentions on how the funds will be spent. For example, the ballot language for Measure D stated:
Town of San Anselmo Vital Services and Infrastructure Measure
To repair potholes, repave roads, reduce traffic congestion, maintain and improve sidewalks/drainage/street medians, preserve public safety, and improve other general Town services, facilities, and infrastructure, shall the Town of San Anselmo establish a one-half cent sales tax for ten years, with annual independent audits, mandatory public expenditure reports, and an independent citizens' oversight committee with all funds staying in San Anselmo under local control?
As demonstrated by the list of projects funded to date by Measure D, the Town has held true to the stated intended use of those funds.
Planning for the Renewal of Measure D
As noted above, Measure D expires on March 31, 2024, which means that funding ceases as of that date. If the Town waits until the November 2024 General Election to seek a renewal, funding would begin in April of 2025. State law requires Council-sponsored general tax measures such as Measure D, to be consolidated with a regularly scheduled general election for Town Council members, except in cases of emergency declared by a unanimous vote of the Council. (Cal. Const. art XIIIC, sec. 2(b); Cal Gov. Code sec. 53724). Under San Anselmo Municipal Code section 2-9.01, General Municipal Elections for Council members shall be held on the first Tuesday after the first Monday in November of even-numbered years. Accordingly, to avoid a gap in tax revenue, a Measure D renewal measure should appear on the ballot in November 2022.
The next General Election takes place in November of 2022. Staff recommends that the Town Council consider placing a measure on the November ballot to continue the transactions and use tax, and that the Council explore options for expansion of the tax to provided funding for other priorities in Town. The Town’s current overall sales tax rate is 8.75%, which is 0.5% below the cap, although some communities have exceeded this rate which has required legislative approval. Adding an additional 0.5% to the current rate would bring our local tax to 1%, resulting in an additional $1.1 to 1.2 million in added revenue to the Town each year.
Potential competing ballot measures include the renewal of the Measure A (Marin Parks, Open Space, and Farmland Preservation Transactions and Use Tax) in June 2022, and the renewal of the Town’s Library Parcel Tax in November 2022. Staff will be bringing an item regarding that measure to the January 25th Town Council meeting.
Funding Priorities
In relation to the initial intent of Measure D, the areas where staff sees a continued need for funding are asset protection of Town roads with crack and slurry seals, partial or full rehabilitation of roads, building maintenance due to long-term deferred maintenance, drainage improvements as mandated by the state, and park improvements.
Staff has identified additional funding needs should the Town Council decide to explore expanding the tax rate an additional 0.5%. These options are listed below:
§ Additional funds for roads, drainage and infrastructure
§ Fire protection, increasing incident response capacity
§ Town facility improvements, including Town Hall, Robson Harrington House and Recreation Center
§ Town park improvements, including Memorial Park and Robson Park
§ Climate Action Projects, including solar on Town buildings and water resiliency projects
§ Establishing and funding an Affordable Housing Fund to help the Town meet the need of increased housing units
Staff is asking the Council review this list and suggest edits. The final list will be used in public opinion polling, if approved. The Council may choose to finalize the list during the meeting or ask that the list be brought back for further consideration at the January 25th meeting.
FISCAL IMPACT
Staff is recommending that the Council authorize the Town Manager to hire a tax measure consultant and to conduct public opinion polling. These steps were taken by the Town Council in 2013. Based on quotes received from qualified local firms that handle this type of work, staff expects these costs to be up to $70,000. The majority of these costs will be covered by existing departmental savings in the Administration and Finance Department. Staff requests that the Council authorize up to $20,000 from the General Fund reserve balance.
CEQA AND CLIMATE ACTION PLAN CONSISTENCY
Discussing the options for a transaction and use tax renewal is not considered a “project” under the California Environmental Quality Act (CEQA), because it does not involve an activity which has the potential to cause a direct or reasonably foreseeable indirect physical change in the environment. (Cal. Pub. Res. Code § 21065). If measure D moves forward and passes, all projects that come forward will be looked at for CEQA compliance and Climate Action Plan consistency.
CONCLUSION
Measure D funds have been instrumental in improving Town infrastructure, and in particular Town roads. Without Measure D funds, roads will deteriorate quickly unless other funds are found and long-term costs for road maintenance will increase substantially.
Staff recommends using professional expertise to evaluate the possibilities for renewing Measure D and returning to a future Council meeting with options for renewal of the Town’s transactions and use tax.
Attachments:
1. 2013 Financial Advisory Committee Final Report and Recommendations
2. Presentation from HDL Sales Tax Consultant
3. November 8, 2022 General Election - Important Dates