San Leandro’s Quarter Cent Solution (Dilemma)

By Steven Tavares

After nearly a year of discussion and unofficial campaigning, San Leandro will place its near-term fiscal health on a ballot measure slated for the November ballot. The San Leandro City Council approved the placement of the measure which would increase the city’s sales tax by 0.25 percent to 10 percent and raise an estimated $4 million annually for the next 7 years. The council voted 6-1, with Councilman Bill Stephens being the lone no vote. Stephens has longed been an opponent of the measure and took umbrage with it as early as last fall for the perception the city was “prepping” voters for the measure.

If approved by San Leandro voters, the 10 percent sales tax would be the highest in Bay Area. The big, round number could be an unprecedented psychological obstacle for some voters, a fact some proponents of the bill made reference Monday night. Councilman Jim Prola discounted the perception by framing the potential tax increase as merely 25 cents for every [$100] spent. “I will still be shopping in San Leandro,” he said.

San Leandro Mayor Tony Santos alluded to Great Britain’s seemingly unrelated 17 percent value-added tax as not being a determent to commerce in that country. “When I go to Europe,” said Santos, “I still see people shopping.”  Aside from Santos’ brief statement, none of the three councilmembers running for office this November (Joyce Starosciak, Michael Gregory and Diana Souza) made much of a statement regarding the sales tax measure. Starosciak, who is running for mayor, only congratulated the city staff for “giving a concise reason for why this is urgent.”

City Manager Stephen Hollister again starkly painted the city’s dire economic situation and said numerous city services and programs would greatly suffer without passage of the sales tax increase, although he said the measure would only create precious time for the city to begin the path towards economic health. “It does not get us out of the woods,” he said.

The city has lost $11.6 million in revenues in addition to $7 million in takebacks from Sacramento while cutting spending by $8.5 million over the last two years, but without additional revenues from the revenue enhancement measure, even more drastic cuts could occur next year, according to Hollister. The city would lose up to 10 partially funded employee positions in addition to cutting use of one fire ladder truck along with positions in the police department. According to Hollister by the beginning of the 2011 fiscal year, the city may need to close some of its smaller libraries while reducing hours at the new Manor branch. He said the city would “likely” close the Boys and Girls Club and eliminate most recreational programs.

The city’s polling firm found that most residents felt comfortable with extending the sales tax sunset clause to seven years. Hollister said revenues gained over seven years projected the closest to its target of restocking the reserve fund to 20 percent of the general fund while allowing time for the economy to recover and before the city begins to absorb new revenues from the coming Kaiser Permanente project.

Nevertheless, Stephens has opposed the sales tax measure every step of the way. In November of last year, Stephens presciently saw the future of the city’s vision for increasing sales tax revenues saying, “I have no intent on moving forward on this, but I want to confront everybody on the reality of it. I just don’t want to send a message to the community that we are prepping them for a ballot measure and that to me is what we are doing.”

Monday night, in voting no Stephens said “I have seen over the years an imbalance on how the council allocates revenues” and added the council has spent tax dollars on labor and not on items to expand and grow the city economy. It will not be enough, he cautioned and and predicted more budget cuts will be needed in the future.

Mayoral candidate Stephen Cassidy, who has made fiscal responsibility his hallmark talking point, disagreed with the mayor and council’s decision to approve the ballot measure and its populist overtones based on opposing the state’s legislature. Cassidy equating it to one of history’s ill-fated stewardships.

“Blaming Sacramento or the recession for all of the city’s budget woes is like the captain of the Titanic blaming the sinking of his ship on an iceberg,” said Cassidy.”

Cassidy also challenged the council’s past decisions regarding its increasing responsibility to maintain soaring employee pension costs. “The city council’s lack of fiscal discipline and failure to reduce employee pension costs, along with overly optimistic and unrealistic revenue assumptions in previous years, explains why our city is on the path to bankruptcy,” said Cassidy. “The solvency of a city should not be risked on the outcome of an election, but because of the decisions this city council made, that is precisely what is occurring.

UPDATE: (July 20, 2009, 4:20 pm) a clarification was made regarding the candidates for office this year who did not make remarks Monday night on the sales tax measure