Council Proposes Tax Hikes to Chip Away at Deficit, Fund Swim Center

Santa Clara voters will see proposals for new taxes on the November ballot as the City Council looks for ways to tackle the behemoth deficit that looms on the horizon.

At its Tuesday night meeting, the Council heard options on how to funnel more money into City coffers, an effort that is much-needed considering budget numbers forecast City expenses burying revenue under a $26 million heap by 2028.

The Council considered five options to bolster City revenue: an increase in the City’s hotel tax (aka transient occupancy tax or TOT), a higher tax on transferring property between owners, a utility tax, a property tax hike and a tax on marijuana.

Any new taxes would need voter approval by a two-thirds majority.

City Manager Deanna Santana said the City needs to prioritize increasing the amount of money flowing into the City. Although her office has made significant cuts to make a dent in the deficit—reporting last week that they have reduced the once $8 million deficit for next year to $1 million—she said the City needs more money coming in to “stabilize current service levels.”

Each of the taxes would raise different amounts of money and be levied in different ways. At the behest of Santana, who feared more than two taxes on the ballot would discourage voter turnout, the Council opted to give City employees direction to draft up ballot measures for taxes on marijuana and a property tax hike.

“We have to consider not bogging down voters with too many initiatives,” Santana said. “We don’t want to fatigue or confuse voters because they won’t participate.”

Because the City lacks a policy on regulating the recreational use of marijuana, this requires the most work and is the most time sensitive, said Ruth Shikada, Assistant City Manager. There are six licenses relating to marijuana sale—cultivating, transporting, selling, manufacturing, distribution and testing. Shikada recommended the City allow all six activities, with the exception of outdoor cultivation, in three areas of the City.

Doing so, she said, would help streamline compliance and law enforcement. If the regulation is too stringent, Shikada said, it could encourage a black market and make neighboring cities more attractive places to start marijuana businesses. Shikada recommended a hybrid tax structure—a combination of a gross-sales tax and a per-square-foot tax.

Estimates on how much money the marijuana tax would generate are between $1.2 and $2.4.

The other tax the Council opted to pursue would raise property tax via a parcel tax from $20 per $100,000 value of a home sold to $25 per $100,000 value of a home sold. That tax would yield roughly $200 million, which would in turn be used on infrastructure.

The largest chunk of that money would fund the International Swim Center and Community Recreation Center, with roughly $100 million going toward the two. The discussion about the amenities screeched to a halt earlier this year during a study session when the Council learned the vision it had for the swim and rec centers would cost between $250 million and $300 million the City didn’t have.

If voters approve the tax, the money would also go toward improving parks and trails, flood protection, libraries and fire stations. Manuel Pineda, Assistant City Manager, said polls conducted by the City’s contractor show low support if the measure fails to contribute money to other infrastructure besides the swim center. Based on initial polling, even the proposed measure would narrowly pass, Pineda said, requiring a 28.6 percent shift from “probably yes” to “definitely yes.”

As part of the the discussion, the Council also unanimously approved paying San Francisco-based Project Finance Advisory Limited (PFAL) $300,000 for its ongoing services relating to “right sizing” the swim center and allocating another $250,000 from the stabilization reserve to the City Clerk’s operating budget.

 

Developments Get Go Ahead

Two Santa Clara developments also got the thumbs-up from the Council.

The site of a 2016 fire will soon play host to 66 for-sale condos and nearly 10,000 square feet of retail space. Often referred to as “The Deck,” the mixed-use development, located at 3408 El Camino Real, will replace what used to be 21,000 square feet of retail.

However, the applicant, multi-millionaire Jon Vidovich, said it was “impossible” to fill the footprint of the land with as much retail as before, but the mixed use designation requested would help ameliorate the City’s ailing retail.

“I am anxious to build it,” he said. “Anything people have a demand for will go in that center.”

The Council approved the development’s rezoning by a 4-0 vote, with Mayor Lisa Gillmor abstaining because of a conflict of interest and Council Member Teresa O’Neill absent.

Although the Council did not greenlight the other project up for discussion, it gave the public insight into its feelings about it. The Council voted 4-0—another conflict for Gillmor required she abstain—to deny a blighted home historic status so it could be developed into a home more in keeping with the neighborhood’s character.

The home in question, located at 1411 Lewis St., is uninsurable due to $411,000 worth of termite damage, water damage, asbestos and a lack of a foundation. It has been unoccupied for 16 years.

Council Member Patricia Mahan, a vocal proponent of historic preservation, said the house exemplifies something being historic due to age versus something that is historic because of its significance. Mahan, along with Vice Mayor Watanabe and Council Member Debi Davis said they toured the home.

“It really wasn’t a good place to venture into,” Watanabe said. “It was old, but at the same time, it was very dilapidated.”

The Council’s next regular meeting will be held 7 p.m. on June 12 in the Council Chambers at Santa Clara City Hall, 1500 Warburton Ave. in Santa Clara.