Jul 24, 2014 - transactions and use ("sales tax") measure for road repair and street safety ..... funding to support onl
COUNCIL AGENDA: ITEM:
CITYOF
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8/5/14 3.4
Memorandum
SANJOSE CAPITAL OF SILICON VALLEY
TO: HONORABLE MAYOR AND CITY COUNCIL SUBJECT: SEE BELOW
FROM: EDWARD K. SHIKADA
DATE: July 24, 2014
SUBJECT: POTENTIAL GENERAL PURPOSE AND SPECIAL PURPOSE LOCAL FUNDING MEASURES RECOMMENDATION (a) Council discussion of community survey results for potential revenue measures for the November 4, 2014 ballot including consideration of a general purpose one-quarter . percent retail transactions and use ("sales tax") measure (recommended), a special purpose one-quarter percent retail transactions and use ("sales tax") measure for public safety (alternate recommendation), and a special purpose one-quarter percent retail transactions and use ("sales tax") measure for road repair and street safety (not recommended). (b) Adopt a resolution of the City Council calling and giving notice, on its own motion, for a Special Municipal Election to be held on November 4, 2014, to submit to the electors of the City of San Jose the following measure:
MEASURE - San Jose Local City Services To fund local city services such as: improving police response to violent crimes, burglary, property and other safety needs; improving 9-1-1 and medical response; improving local fire station operations; repairing potholes; maintaining city streets; expanding gang prevention; creating more jobs through economic development, shall the City of San Jose enact a 114 cent (.25%) sales tax for 9 years, requiring an Independent Citizens Oversight Committee to publicly review spending, and all revenues controlled locally?
YES
NO
HONORABLE MAYOR AND CITY COUNCIL July 24, 2014 Subject: Potential General Purpose and Special Purpose Local Funding Measures Page2
( 1)
(2)
(3)
(4)
(c)
Council discussion and consideration of whether the full text of the proposed ordinance should be printed in the November 4, 2014, Voter's Sample Ballot, pursuant to Elections Code 1211 1, to be incorporated in the resolution calling the election; Council discussion and consideration of whether to permit rebuttal arguments in the November 4, 2014, Voter's Sample Ballot, pursuant to Elections Code Section 9285, to be incorporated in the resolution calling the election; Council discussion and consideration of whether to authorize the City Council or any member or members of the City Council to submit an argument in favor of the City measure on the November 4, 2014, Voter's Sample Ballot, pursuant to Elections Code Section 9282, to be incorporated in the resolution calling the election; and Direct the City Clerk to take all actions necessary to place this measure for a November 4, 2014, Special Municipal Election, if needed.
ALTERNATE RECOMMENDATION: Adopt a resolution of the City CounCil calling and giving notice, on its own motion, a Special Municipal Election to be held on November 4, 2014, to submit to the electors of the City of San Jose the following measure: MEASURE - San Jose Public Safety Improvement
To fund public safety improvements, including increasing the number of police officers patrolling City streets; improving 911 response times; expanding neighborhood safety, crime/gang prevention programs; and equipping police with modern police radios and other technologies to fight crime, shall the City of San Jose enact a Y4 cent (.25%) sales tax for nine years dedicated to public safety, requiring an Independent Citizens Oversight Committee to publicly review spending and all revenues controlled locally? (1)
(2)
(3)
YES
NO
Council discussion and consideration of whether the full text of the proposed ordinance should be printed in the November 4, 2014, Voter's Sample Ballot, pursuant to Elections Code 12111, to be incorporated in the resolution calling the election; Council discussion and consideration of whether to permit rebuttal arguments in the November 4, 2014; Voter's Sample Ballot, pursuant to Elections Code Section 9285, to be incorporated in the resolution calling the election; Council discussion and consideration of whether to authorize the City Council or any member or members of the City Council to submit an argument in favor of the City measure on the November 4, 2014, Voter's
HONORABLE MAYOR AND CITY COUNCIL July 24, 2014
Subject: Potential General Purpose and Special Purpose Local Funding Measures Page 3
(4)
Sample Ballot, pursuant to Elections Code Section 9282, to be incorporated in the resolution calling the election; and Direct the City Clerk to take all actions necessary to place this measure for a November 4, 2014, Special Municipal Election, if needed.
OUTCOME Adoption of a resolution calling a Special Municipal Election would result in voter consideration of the above recommended ballot measure(s) at the November 4, 2014 General Election. Staff has prepared the necessary materials including the ordinances, resolutions and ballot language for Council to place any or all of the above measures on the November 4, 2014 ballot. The documentation needed to place a special purpose measure dedicated to roads (San Jose Road Repair and Street Safety Measure) is also attached for reference. The August 5, 2014 Council meeting is the last regular Council meeting before the Santa Clara County Registrar of Voters August 8 deadline for a measure to be placed on the ballot. Since general purpose funding measures must occur at a regularly scheduled general election for council, the next opportunity is June 2016. A special purpose funding measure may be placed on the ballot at any time. If any of these local revenue measures are approved by voters, the City would be authorized to impose a retail transactions and use ("sales") tax in the amount of one-quarter percent, effective April 1, 2015. Based on current projections, any one of these measures could result in additional annual revenues of approximately $34 million, which would significantly enhance service levels consistent with priorities identified by the community and the City Council.
BACKGROUND At the June 17, 2014 Council meeting, Staff was directed to conduct additional public opinion research studies on four possible revenue measures: (1) a general purpose sales tax, (2) a special purpose sales tax dedicated to public safety, (3) a special purpose sales tax dedicated to roads, and (4) an increase to the existing Marijuana Business Tax up to a maximum of 20%. These local sales tax measure options were focused on a Y4 percent rate to sunset in nine years. The specific results of this public opinion research are presented in a separate agenda item also on the August 5th agenda titled, Polling Results for Potential November 2014 Revenue Measures (Item 3.3). Based on consultant input, the Marijuana Business Tax should not be placed on the same ballot as a sales tax measure, whether general or special. For this reason, the potential increase in the Marijuana Business Tax is addressed in an agenda item to be heard after consideration of the sales tax items on the August 5th agenda, Marijuana Fees and Potential Business Tax Increase (Item 3 .5). As previously discussed, City finances appear to have stabilized following several years of significant staff and service reductions. However, budget projections for the next five years
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show very limited ability to begin restoring priority services toward acceptable levels in areas identified by the public and Council, absent additional revenue. The need for additional revenue sources to address San Jose's strnctural deficit and underlying fiscal challenges was part of the General Fund Structural Deficit Elimination Plan and the more recent Fiscal Refmm Plan. In the last several years, Council has held numerous discussions about how and whether to proceed with a local revenue measure (September 3, 2013, December 10, 2013, February 10, 2014, March 5, 2014, and June 17, 2014). Additionally, several polls have been conducted in November 2013, January 2014 (part of Budget Survey), and now July 2014. Revenue and service level issues also were discussed in the context of the Deferred Maintenance Infrastructure Backlog at the May 20, 2014 Council meeting. At that time, there was potential for a countywide transportation sales tax measure led by the Silicon Valley Leadership Group (SVLG). Subsequently, the SVLG has returned to the original November 2016 target.
ANALYSIS M1111icipal Sales Taxes
The existing combined sales tax rate in the City of San Jose is 8.75%, of which 7.5% is comprised of the statewide base sales tax. By state law, there is a 2% cap on additional sales taxes that can be added at the local level. Currently, 1.25% of this cap has been used by other local government agencies for the following: • County Retail Transactions and Use Tax (0.125%) • County Transit District (0.50%) • Valley Transportation Authority (0.50%) • Valley Transportation Authority BART Operating and Maintenance Transactions and Use Tax (0.125%) This leaves 0.75% available for the City of San Jose and all other local measures, whether sponsored by the City, County or any local special district authorized to impose a tax. As other agencies seek voter approval within the .75% available, this balance will continue to decrease. Should the City of San Jose be interested in pursuing a locally enacted measure following other successful future measures by other agencies, the City would be precluded from doing so. Under California law, placing a local sales tax on the ballot requires the vote of two thirds of the governing body. For the San Jose City Council, therefore, a local sales tax would require eight members to approve placing it on the ballot. If the tax is for general purposes, then a simple majority of the voters must approve it. If it is a special purpose funding measure, then a 2/3rds voter approval is required.
Polling Results Based on Council direction at the June 17, 2014 meeting, additional public opinion research was unde1iaken on more refined concepts for the four options with a larger sample size of 1,500
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Subject: Potential General Purpose and Special Purpose Local Funding Measures Page 5
likely November 2014 voters. As noted in the recent report by the City's consultants, recent studies indicate that there is very strong margin of support by likely voters to approve a general purpose funding measure at 67%, a 17 percentage point margin above the 50%+ 1 majority requirement. The public safety special purpose measure also polled above the margin of error at a strong 71%,a4 point margin above the required 2/3 requirement. The transportation special tax improved significantly from prior polls, but did not pass the 2/3 majority threshold, coming in at 65%. More detailed results are provided in the Polling Results for Potential November2014 Revenue Measures (Item 3 .3), also on the August 5th agenda.
Spending Priorities for Proposed General Purpose Measure A locally enacted 'l4 percent increase in the sales tax would generate an estimated $34 million annually in San Jose. This type of measure is not a tax on homes or property, and visitors to San Jose help pay the cost. This type of tax is not levied on food purchased as groceries or prescription medication. All proceeds of a general purpose funding measure must be placed into the City's General Fund available for general municipal purposes. None of the funds from this locally enacted measure can be seized by the State. As part of the City Manager's 2014-2015 Proposed Operating Budget, the Administration developed an initial Spending Priorities Plan should new revenue be available. One option is to identify a Study Session date in September to review and potentially update the Spending Priorities Plan to reflect current priorities. High-level priorities for the general purpose measure are reflected in the Spending Priorities Plan including: •
•
•
lmproving police response to violent crimes, burglary, property and other safety needs. Improving 911 and medical response, including improved ability to communicate through modernized radio systems. Improving local fire station operations. Repairing potholes and maintaining City streets. Expanding gang prevention. Creating more jobs tlu·ough economic development. Homelessness rapid response and rehousing effort. Expanding library hours .
If the sales tax measure passes in November, Council can take budget action to allocate the new sales tax revenue anticipated to start April 1 for the remainder of FY 2014-2015.
Restricted Uses for Public Safety Special Purpose Measure Revenues from a public safety special measure, also estimated at $34 million, could be utilized to increase approved staffing levels, increase training opportunities and upgrade equipment. As a special purpose measure, these funds are restricted to the defined uses and may not be used for general purposes. The restricted uses reflected in the ordinance are as follows:
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Subject: Potential General Purpose and Special Purpose Local Funding Measures Page 6
• • •
• • • •
Recruiting and retaining police officers, fire fighters and other staff to support public safety efforts; Improving 9-1-1 response times in response to emergencies of all types; Funding crime prevention, gang prevention and intervention and at-risk youth programs; Funding equipment and technology purchases and capital infrastructure investments that support public safety efforts, including, but not limited to, safety equipment, modern radios and interoperability equipment, computer aided dispatch improvements, vehicles, and public safety facilities improvements; Funding public safety-related training; Funding emergency preparedness efforts; Funding public safety outreach efforts; and Funding Public Safety Special Tax Fund accountability efforts.
Accountability and Oversight The most recent community survey examined the potential impact on the viability of the measures by including independent citizens oversight. For all three revenue measures, language has been included in the measure to require financial oversight (annual audit and review) and to go beyond what the law requires to include an Independent Citizens Oversight Committee. It is within Council's purview to define the roles, responsibilities, and structure of a Citizen Oversight Committee. Cities in California with local purpose sales taxes address citizen oversight in a variety of ways, including the size of the Committee, its specified role and standing, and even the categories of members that could be seated on the Committee. Staff also sees this as an opportunity to advance transparency and open data availability, including ongoing funding to support online performance measurement of activities and outcomes resulting from new revenues. These detailed decisions could be made at a later date following Council consideration of placing the measure on the ballot.
EVALUATION AND FOLLOW-UP If Counciladopts a resolution to submit a tax measure to the voters on the November 2014 ballot, arguments for and against the measure would be due to the Registrar of Voters by 12:00 ·Noon, August 8, 2014. The City Attorney's impartial analysis would be due to the City Clerk by 12 Noon on August 19, 2014.
POLICY ALTERNATIVES
Alternative 1: Special Purpose Measure for Streets/R.oads. As part of the recent public opinion research, the viability of a special purpose measure dedicated to improving road maintenance and rehabilitation was evaluated. Pros: The need for significant additional funding for road maintenance was presented to the City Council as part of the Deferred Maintenance Infrastructure Backlog report that showed a $76 million annual unfunded need for maintenance and another $434 million one-time backlog for
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full rehabilitation of the City's streets. A dedicated measure would help address the amwal maintenance needs and could be partnered with a larger countywide measure to address the backlog.
Cons: This funding would be limited to only transportation uses and would not address service needs in any other portion of the City. Reason for not recommending: While viability was much stronger than in past years, the measure did not reach the 2/3rds majority needed.
PUBLIC OUTREACH/INTEREST
D
Criterion 1: Requires Council action on the use of public funds equal to $1 million or greater. (Required: Website Posting)
~
Criterion 2: Adoption of a new or revised policy that may have implications for public health, safety, quality of life, or financial/economic vitality of the City. (Required: Email and Website Posting)
D
Criterion 3: Consideration of proposed changes to service delivery, programs, staffing that may have impacts to community services and have been identified by staff, Council or a Community group that requires special outreach. (Required: E-mail, Website Posting, Community Meetings, Notice in appropriate newspapers)
This memorandum will be posted on City's website for the August 5, 2014, City Council Agenda.
It should be emphasized that the role of City staff, with respect to any ballot measures, is to provide information to the public. As it relates to campaign activities, City is prohibited from using City resources for any ballot measure. The role of the City Attorney's Office is to develop the ballot question that will be considered by Council. The City Attorney's Office is also responsible for developing an impartial analysis of the ballot measure to provide factual information that is printed in the sample ballot along with arguments for and against the measure as well as rebuttals to the arguments for and against the measure, if submitted.
COORDINATION The City Attorney's Office, Budget Office and Finance Department have been involved in the coordination of this memo.
HONORABLE MAYOR AND CITY COUNCIL
July 24, 2014 Subject: Potential General Purpose and Special Purpose Local Funding Measures Page 8
COST SUMMARY/IMPLICATIONS The City Clerk will issue a separate memorandum which provides the ballot measure costs and the associated budget related to the placement of either recommended tax measure on the ballot, . as well as the authorization for rebuttal arguments and the publication of the full text of the measure. I
L2 )( . EDWA~.~A CITY MANAGER
For questions please contact Teri Killgore, Assistant to the City Manager, at (408) 535-8102.
