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Santa Cruz sales tax measure, which could’ve raised $6M, is dead for now — here’s why and what happens next

The measure was expected to help create an additional $6 million annually for the city. That revenue would have been reinvested back into a variety of programs and departments including homelessness services, parks, public works, wildfire prevention, affordable housing and infrastructure improvements.

A proposed sales tax measure that would’ve increased Santa Cruz sales tax from 9.25% to 9.75%, and raised $6 million, won’t be going forward right now.

“There was no consensus reached by the Ad Hoc Committee and a proposal was not forwarded in time for a special meeting,” Santa Cruz Mayor Donna Meyers said Thursday.

The measure was voted down during a June city council meeting and ushered into a committee discussion. With those talks breaking down, the measure’s future is uncertain.

The proposed revenue measure would increase the city’s tax rate from 9.25% to 9.75%, according to city officials. If...

“It is up to them [council] to potentially consider putting this on the ballot in November or June,” Assistant City Manager Laura Schmidt said.

There’s a chance for resurrection: The measure could still find its way to the polls next year.

In order for the measure to be placed on a special election ballot in June 2022 or on the November 2022 election ballot, city council members would have to come to a consensus by March 11 or August 12 for the respective ballot dates.

The measure, which was brought forward by the council’s revenue committee, was expected to help create an additional $6 million annually for the city. That revenue would have been reinvested back into a variety of programs and departments including homelessness services, parks, public works, wildfire prevention, affordable housing and infrastructure improvements.

The increase was defended as a means to help balance the city’s general fund, which suffered a $10 million loss in 2020 and an $11 million loss this year.

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“The deficit is one aspect,” Schmidt said. “The broader community services are the real benefit.”

The proposal requires unanimous approval from all council members to appear on the ballot. Schmidt said city officials were not involved in the council’s Ad Hoc Committee but did provide data and resources. The committee was composed of Vice Mayor Sonja Brunner, Councilwoman Renee Golder and Councilwoman Sandy Brown.

Brown was adamantly against the measure during the council’s June 22 meeting, declaring she could not support the measure as it currently stood and demanding the council look into improving salaries and find solutions for a living wage for residents.

Brown said the committee had met several times and was close to putting a proposal together that could be forwarded to the city attorney, but it fell short.

“The mayor never had any intentions of calling a meeting,” Brown said. “She killed it.”

Brown said she felt uncomfortable supporting the measure under the pretense that the city is in a “fiscal emergency” and without assurance that the funds would be used to help boost wages closer to $20 per hour for city workers.

According to Meyers, the city is an approximate $4 million deficit. With the delay in voting for the measure, an estimated $3 million in potential 2022 revenue might have been lost.

“Councilwoman Brown didn’t vote, she’s not in support of bringing it to voters,” Meyers said.

Meyers, who is on the council’s revenue committee, said under Brown’s stipulation the measure would’ve had to have been reintroduced and proposed as a special tax measure, which requires a two-thirds majority in order to pass. That was not the current proposal the committee was weighing in on.

“It didn’t make it. We’ll just have to keep working. We have a need for revenue to maintain city services,” she said.

Meyers added that the revenue committee had conducted an independent poll that found 67% of residents were in favor of a general tax appearing on the ballot.

“I’ve never heard anyone clamor for city council to put a sales tax measure on the ballot. That just doesn’t happen,” Brown said.

Despite the measure being ultimately decided by a vote among residents, the disagreement among council members has tabled the measure for now.

Councilwoman Martine Watkins said the situation was a “missed opportunity.”

“I believe democracy is best served when our community populace can weigh in,” she said.

The proposed increase would put Santa Cruz on par with Scotts Valley, which currently has the highest tax rate in the county at 9.75%. The rate varies around the county including Capitola at 9%, Watsonville at 9.25% and unincorporated portions of Santa Cruz at 9%.

City officials previously said the rate would be split 50-50 between residents and tourists, though the split varies among industries — with restaurants, for example, tourists would account for an estimated 70%.

In the meantime, Schmidt said city officials will continue working with city departments to help improve their respective budgets along with applying for grant funding as short-term solutions.

Correction: An earlier version of this story incorrectly stated that Mayor Meyers was on the Ad Hoc Committee. She was not; Councilwoman Renee Golder was on that committee along with Vice Mayor Sonja Brunner and Councilwoman Sandy Brown.