UPDATED: A Taxing Week In Orange County

It’s been a taxing week in Orange County.

Last night, the Westminster City Council voted 4-1 to place a 1% sales tax hike on the November ballot. GOP Mayor Tri Ta – who declared his intention to oppose the tax increase – had it within his power to stop it simply by voting against putting it on the ballot. Why put on the ballot a measure one opposes and believes harmful? A mystery for another day.

Instead, Ta opened the door by conditioning his support for a November vote on including a 6-year sunset provision. Take hike proponents Councilmembers Diana Carey and Margie Rice didn’t like the provision but swallowed knowing, from their perspective, getting the sales tax hike on the ballot was the priority. As Carey made clear in her comments, they can worry about getting the tax increase extending six years from now.

La Palm City Council Ready To Jump On Board The Tax Hike Train
The night before, the La Palma City Council also took a big step toward voted to placing a 1% sales tax increase on the fall ballot. Carey reported during last night’s council meeting – incorrectly, as it turns out — that La Palma voted 5-0 to put a sales tax on the ballot. it was approved 5-0. OC Daily has placed calls for confirmation to the La Palma City Manager’s office, the city clerk, and other extensions, but no one is answering the phone. The city doesn’t video its meetings.

UPDATED (1:28 p.m.): OC Daily received an e-mail from the La Palma City Clerk as to action taken by the city council on Tuesday:

The City Council did not vote to put a measure on the November 8 ballot on Tuesday, they directed staff to bring the necessary resolutions and documents for a one cent transaction and use tax forward on the July 5 Agenda for Council consideration.  That action was a 5-0 vote.

According to the staff report, the council considered several options: a parcel tax, a Utility Users Tax (UUT) increase, a Transient Occupancy Tax increase, and a Transaction and Use tax increase – all of which require a minimum two-thirds majority council vote to be placed on the ballot.

Let’s pause and review the distinction between a general tax and a special tax. If the revenue from a tax increase will go into the general fund to spent any way the city council pleases, then it is a general tax and requires approval by only a simple majority of voters. If the tax is designated to a particular use – think of the county’s Measure M transportation sales tax – then the voter approval threshold is two-thirds.

A parcel tax is considered a “special tax” and therefore the voter approval threshold is two-thirds. City staff estimated the necessary average parcel tax to be $350 per homeowner. Politically, that would be dead-on-arrival: instead of two-thirds approval, a parcel tax of that size would be defeated by at least a two-thirds vote of the property owners.

Staff estimated it would require boosting its existing UUT from 5% to 11.7% in order to raise the $1.5 million believed necessary to maintain existing city services. Politically speaking, more than doubling the UUT tax just sounds too big to voters, and would probably fail.

In the same vein, the city’s TOT tax would have to increase from 8% to 40% to hit the desired revenue target – a political non-starter.

Las Palma’s sales tax consultant estimated a 1% sales tax hike would “generate $1.5 million, which would address the City’s immediate and long-term problems.” Plus, it only requires a simply majority for approval – and 1% doesn’t sound as big.

Givne those realities, the city council – as noted above – directed staff to bring back the necessary documents for a July 5 vote on placing a 1-cent sales tax hike on the November ballot.

Fountain Valley City Council On Deck
The next Orange County city council to consider placing a sales tax increase on the November ballot is Fountain Valley, which is struggling with a budget deficit. Like Westminster, Fountain Valley is a general law city and can only place a tax increase in the ballot by a vote of at least two-thirds of city council members.

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