Measure F: Santa Cruz City Sales and Use Tax explained

Santa Cruz City Hall
If passed, Measure F would raise the sales tax in the city of Santa Cruz by 0.5% from 9.25% to 9.75%.
(Kevin Painchaud / Lookout Santa Cruz)

Proponents view Measure F on the June 7 ballot as a means of addressing some of Santa Cruz’s most pressing matters. Others, however, do not trust the city council to allocate the additional funds appropriately.

The first in a Lookout series explaining the measures voters around Santa Cruz County will see on the June 7 ballot.

When COVID-19 hit, already difficult-to-find funding for affordable housing, mental health and essential infrastructure took a back seat to the pandemic’s immediate demands. More than two years later, elected officials divvy up available budgets to meet the many challenges in front of us.

In response to needs it is seeing, the Santa Cruz City Council put Measure F on the June 7 ballot by a unanimous 7-0 vote.

Measure F would authorize the City of Santa Cruz to increase its general fund by levying an additional 0.5% — one half of 1% — sales tax, raising about $8 million annually.

A “yes” vote would authorize the city to raise its sales tax by 0.5%, from 9.25% to 9.75%. The extra revenue would go to the city’s general fund, and the city council would determine where to allocate the money.

A “no” vote would reject the proposed sales tax increase and keep the current rate of 9.25%.

Food, prescription medicine, diapers and feminine hygiene products would be exempt from the tax hike.

What does the measure do?

The measure, originally proposed by the budget and revenue subcommittee of the city council, required a fiscal emergency vote, indicating that the council recognized a major disruption in operations or services due to an unforeseen or sudden decrease in funds. The city intends to use the additional tax funds to address key areas of concern, according to city spokesperson Elizabeth Smith. How the generated revenue is actually used will ultimately be determined by the city council, if the measure passes.

Results from a survey of June 2022 likely voters regarding serious issues in Santa Cruz.
(Via City of Santa Cruz)

What money is involved?

The new tax would add about $6 million to the general fund, which totaled $112.5 million for the past year.

“The measure will add money to the general fund so that these initiatives can be addressed,” said Smith. “So affordable housing, mental health crisis response, the homelessness issue and trying to get a proactive handle on both impacts of homelessness and support for folks experiencing homelessness.”

Economic recovery is another large concern for residents.

“Helping local businesses recover from the pandemic and making sure that we have the level of service that residents require are other things that we’ve heard are important to residents over and over again,” said Smith.

Who supports the measure?

Measure F supporters say the extra money will be used to fund affordable housing, mental health services, homeless services, and park, watershed and recreational facility maintenance.

Don Lane, a former Santa Cruz mayor and Measure F supporter, said he believes the city needs the extra funds to follow through with its commitments.

“Recently, the city council has made some really strong commitments to address homelessness and its impacts on the community,” he said. “The reality is that the city budget doesn’t have capacity to follow through at a high level on those commitments, and the revenue from this measure will make that possible.”

Lane trusts the city council to hold true to these promises.

“It’s clear that the city council and the community have made these issues priorities, almost everybody in this community wants that, so there isn’t any reason to believe that the council isn’t going to spend the money that way,” he said, adding that the community is the council’s watchdog and can keep an eye on it to ensure they follow through. “That’s what the city council does. It pays attention to community needs and sentiments.”

Lane also said that the measure required all seven councilmembers to vote affirmatively in order to get it on the June ballot, indicating determination to fund these issues.

“Earlier there was some hesitation on the part of one or two councilmembers, and now I think they recognized that this really was an important thing for the community,” he said. “I think we brought a lot of factions together on this that maybe haven’t always been in agreement.”

Who opposes the measure?

Others are not so optimistic.

Although the city says that essentials are exempt and visitors generate half of the city’s sales tax revenue, Measure F opponents say a sales tax increase is a regressive tax since it taxes people equally across all income levels. This means that high-income earners will not notice the effects much while low-income earners undoubtedly will.

There is no sign of a named group opposing the measure.

Ron Pomerantz, a retired firefighter and Measure F opponent, signed the filed argument against Measure F. He said he thinks regressive taxes — which include sales taxes — don’t belong in a progressive community.

“Poor people pay a much higher percentage of their income to them than higher-income people, who probably won’t even feel it at all,” he said.

Further, Pomerantz is not convinced the city council will use the funds as outlined in the measure.

“They lay out a whole litany of great things that I certainly support, but the council can’t make those promises,” he said. “If they truly wanted the money to go where they said it would, they would have called it a special tax and had it require a two-thirds vote.”

At the end of the day, Pomerantz simply disagrees with the council calling the tax an emergency.

“Nothing that they claim is ‘emergency’ about the need for this measure,” he said, adding that there was plenty of time in the past to introduce other tax measures. “The problems like affordable housing, homelessness and mental illness are long, long persistent problems that didn’t happen yesterday, and they certainly haven’t stepped up to address them.”