A proposed ¾-cent sales tax hike in Pasadena is not the way to plug the city’s expected $20 million budget shortfall. The proposed sales tax increase is not fair, it’s not accountable and, in the end, it won’t be enough.
City leaders have said Pasadena will be upside-down to the tune of $20 million by 2021. It hasn’t been stated explicitly, but that shortfall is obviously tied to what the city must pay every year to CalPERS for public employee pensions.
They’ve made vague promises of providing “services” with the anticipated $14 million to $20 million in new revenue generated by this proposed tax hike. But the ballot measure doesn’t mandate how that new money will be spent, nor does it include any specific oversight of that revenue.
There’s no guarantee that money won’t go directly into the CalPERS black hole.
Meanwhile – Measure I – will saddle Pasadena with one of the highest sales tax rates in California at 10.25 percent. If passed, this measure will make living and running a business in Pasadena much harder and even more unaffordable.
It’s the same story up and down the state. There are nearly 100 measures pending in cities and counties from Pasadena to Alameda seeking sales tax increases, utility tax increases and other taxpayer bailout schemes, according to a scan of measures listed on Ballotpedia. Those measures are coming after similar tax measures peppered ballots in California in 2016 and 2017.
Just like elsewhere in the state, once that Measure I money is gone — and it will go fast — Pasadena officials will be right back where they are today, facing even more CalPERS debt.
City officials should be finding innovative ways to govern within their means. But that’s a Herculean task that involves facing down public employee unions.
It’s much easier to try and convince voters that the only way to bring police and fire services up to snuff is through yet another regressive – and declining (we’ll get to that) – form of taxation.
Voters need to understand why this won’t work.
CalPERS’ costs are only expected to grow in the coming years as the pension agency is requiring employers (Pasadena and other cities) to pay off their pension debt more quickly and at higher rates.
Even if Pasadena voters pass this ill-thought-out ¾-cent sales tax hike, it’s unclear that $14 to $20 million a year in projected new revenue will pay for current services plus those increasing pension costs.
CalPERS costs are going up. So, Pasadena’s projected $20 million shortfall (CalPERS debt) will also increase moving forward. The go-to solution to plug these holes has been to tap taxpayers by way of sales taxes.
Sales tax increases are attractive to cities because that money doesn’t have to be shared with the state and school districts, as do property taxes. When a proposed sales tax increase is a “general tax,” meaning it isn’t tied to a specific use, such as parks or libraries, it can be passed by a simple majority rather than a two-thirds vote which is a more difficult threshold to cross. Sales taxes are therefore an easy target.
But sales taxes are regressive, meaning its harder on low-income families. If you only have a small budget to buy shoes, detergent, or tires, an extra ¾-cent per dollar spent takes a big bite. If you’re wealthy, ¾ of a penny is hardly noticeable. Same thing with small businesses, the backbone of our economy. Smaller spending budgets get hit harder.
Pasadena’s proposed sales tax increase would zap those who can least afford it the hardest.
Whether people are wealthy or not, they are figuring out how to avoid sales taxes all together.
There’s no doubt the $20 million shortfall in Pasadena is real and coming sooner rather than later. But the fact is, council members haven’t engaged in any meaningful belt-tightening, even spending an extra $2.4 million on a safety fence and two new positions after approving the proposed ¾-cent sales tax hike for the ballot.
If the city were truly that pinched, leaders should have declined those new hires and they should have found innovative ways to pay for the fence, such as grants or community sponsorships.
Instead, Pasadena’s leaders are living proof of Economist Thomas Sowell’s observation that: “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
It’s long past time for Pasadena’s leaders to learn their lesson. Vote no on Measure I.
Hilary Norton is the Chair and Paul Little is the Treasurer of the Los Angeles County Business Federation, BizFed, a grassroots alliance of more than 175 business organizations representing 395,000 businesses with nearly 4 million employees throughout L.A. County.