Why Does this Town Council Need to Tax Us When They Have $16,000,000 More in Cash in 2018 Than They Had in 2014???

It is a common misconception that we would hit the top of allowable sales tax dollars if voters approve Measure G. Currently (10-11-‘201) the Town has ¼% available under the 2% district tax limit set by the State. The notion that LG must pass Measure G to avoid the County from “crowding out” the Town’s ability to capture this ¼% is incorrect and it certainly isn’t a good reason to tax anyone if there isn’t a true need to tax. Let me comment on the notion of this “crowding out” effect. If there was a legitimate need and the Town found itself in the position of having to raise the sales tax above the 2% limit, the Town requested the State Legislature give them an exemption to exceed this cap.

This is commonly done and if need is demonstrated, routinely approved. In fact, the County of Santa Clara has already received an exemption to the 2% district tax limit with the passage of SB 703 in October, 2017. That bill authorized the Counties of Alameda and Santa Clara to impose sales taxes at a rate of no more than .5% or .625% respectfully for general or specific purposes that would exceed the combined rate limit of 2%. In the case of the County of Santa Clara, they now have the authority to increase to a maximum of 9.875%. That means if the Town enacted a ¼% sales tax thereby hitting the 2% district tax limit, the County still has the headroom to add .625% above this!

That same bill also authorized the City of Santa Fe Springs to impose a sales tax for general or specific purposes at a rate of no more than 1% to exceed the combined rate limit of 2%. So this can be done, if warranted. I might point out that the County of Santa Clara has a measure on this November ballot to EXTEND the current existing 1/8 County sales tax which was first enacted on November 6, 2012. That means the County will remain at 9%. Since these types of measures can only be brought to the voters during general election years, there is nothing on the horizon for the next 2 years from either the County or VTA to increase county sales taxes. It just isn’t an issue. In summary, given the additional .625% head room that the County has above the 2% cap, the notion that the Town must “rush to pass” an increase in the sales tax now to avoid a future “crowd out” is a “scare tactic” and isn’t supported by the facts. Let alone, there isn’t any economic justification for increasing the sale tax in our Town and further hurting the already struggling downtown merchants.

A number of cities have exceeded 9.25% by applying for an exemption. Santa Clara County already has. Los Gatos can apply should they wish. Our question is why tax us when we have $76,000,000 of cash in the bank? That’s up $16,000,000 in just the past 4 years. Our problem is not cash, but cash management. The town earn’s about 1.7%, on much of the cash, and then pays pension debt at 7.25%d on roughly $47,000,000 of pension debt plus another $12,700,000 on health benefits. What sense does that make? If you look at the town’s budget, you can see that the town is running with surplus’s for the next 5 years even with the increases in the payments due for pension debt. By the way, no town that I know of has gotten away without paying down the pension debt. We are very strong advocates of paying it down. Just the “interest” costs in the last fiscal year EXCEEDED $3,000,000. Think of what the town could have done with that?!

The sales tax will only garner somewhere between $700,000 to $900,000 per year but we’ll likely still be paying $3,000,000 in this next fiscal year in “interest”. If we put $7,000,000 to $10,000,000 towards pension debt, we could almost cut the debt by an amount equal to the money the town would take from us with a sales tax, and the town would not burden the retail businesses that are already struggling to make it in this Amazon world. Why add to their burden? My issue is the tax and spend mentality of this council (excepting Ms. Spector) rather than properly using the cash “hoard” that they have built in just the past 4 years alone! For them, it’s easier to tax us than to buckle down and think about a better way to manage existing cash. In full disclosure, I was on a Citizen Committee in 2014. Three of us advocated an increased sales tax then, but since then, we have been educated with the information we weren’t given at the time of our decision. All three of the citizens on that committee are against this general tax measure. By the way, the council rejected our request for the 1/4% additional sales tax. Quite a turn of events in the past two years.

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