Local News

Council Approves Sales Tax Increase Ballot Measure

Fullerton City Council voted 4-1 (Whitaker “no”) at their June 7 meeting to place a 1.25 cent sales tax increase measure on the November 2020 General Election ballot, to help offset a $7.9 million deficit, and voted to hire the private firm Terris Barnes Walters Boigon Heath, Inc. (TBWBH) Strategies to “educate” the public about the sales tax increase.

Background on Proposed Sales Tax

The City’s Infrastructure and Natural Resources Advisory Committee (INRAC) recommended on March 3 that the City approve a dedicated (special) sales tax ballot measure specifically for infrastructure improvements, following a six-month study of Fullerton’s infrastructure needs that found it to have been severely underfunded for decades. INRAC’s report stated that nearly $25 million a year was needed for necessary infrastructure improvements. A special infrastructure tax would require a 2/3 approval by voters in order to pass.

At that same meeting, FM3, a company that the City contracted with to conduct a community survey, reported that 6-in-10 respondents supported a potential general sales tax measure, which would not be dedicated solely to infrastructure, and would require only a majority vote to pass. The survey found that there was not enough public support for a special tax, as it would require a 2/3 vote to pass.

Based on this, the City Staff and the City Manager recommended that Council place a general sales tax, as opposed to a special (infrastructure only) tax on the November ballot.

Prior to the July 7 meeting, INRAC submitted a letter to Council expressing support for a special, but not a general, sales tax. “The Infrastructure and Natural Resources Committee (INRACA) is gravely concerned over the revenue ordinance and sales tax initiative introduced by City Manager Ken Domer and under consideration by the City Council. Our concerns are two-fold. First, the plan has been characterized as having been recommended and endorsed by INRAC, which it is not the case. Second, the plan seriously underfunds infrastructure, which will result in further degradation of our infrastructure, and roads, in particular,” the letter states.

Under California law, sales taxes may not exceed 10.25%. The current sales tax rate in Fullerton is 7.75%. Of that amount, 1% goes to Fullerton. The rest goes to the State and other programs.

The Financial State of the City

Prior to the Council vote on July 7, City Manager Domer gave a presentation in which he explained the financial difficulties the City is facing, and made the case for why a general sales tax is needed.

Largely due to the economic impact of COVID-19, the City’s fiscal year 2020-21 General Fund budget has a $7.9 million deficit.

This year, as a result of COVID-19, the City has already fired nearly all its part-time employees, cut funding to the Fullerton Museum Center, reduced the Library’s hours open to the public from 61 to 34 hours, and the executive staff has taken a 10% pay cut.

In recent weeks, following local and national protests, members of the public have pointed out that nearly 70% of City spending is for police and fire, and that cuts should be made there to fund other services.

Fullerton’s general fund budget for 2020-21.

Fullerton Mayor Jennifer Fitzgerald hosted a Virtual Town hall on July 9, to explain how Fullerton’s current pension liability (particularly for retired public safety employees) has become a major unfunded drain on City revenues.

Screen shot from Mayor Fitzgerald’s July 9 Virtual Town Hall on pensions with City Manager Ken Domer.

Taxes Fund the City

City revenues are largely derived from property taxes (approximately $47 million to the General Fund) and sales taxes (approximately $21.3 million) for the next fiscal year. These two revenues make up roughly 70% of the overall General Fund revenue to the City.

The staff report pointed out that one severe blow to local revenues was Prop 13 in 1978.

“Prior to the passage of Proposition 13 in 1978, a city would set their expenditure budget, and then set the property tax rate locally to generate the necessary revenue required to meet the expenditures that were not met with other revenues sources. Proposition 13 in 1978 dramatically changed that, setting property taxes at 1% of a base line assessed valuation of the property. Assessed values are allowed a 2% growth per year unless a property, typically residential, changed ownership upon which the assessed value was reset to the market value upon which the property was transacted. This is the reason why neighbors in Fullerton can be paying drastically different property tax amounts. A long-term resident who owned a property prior to Proposition 13 pays a fraction of the property tax of a neighbor who only recently purchased their house due to their difference in assessed values,” the staff report said.

Impact of Prop 13 on local revenues, from the City Manager’s report.

Programs the New Taxes Will Fund

According to the staff report, if approved by the voters, the revenue generated would help fund not only the improvement to the City’s infrastructure, but also the City’s homeless initiatives, community services, and public safety/emergency medical needs.

Text of the proposed sales tax ballot measure.

Citizens’ Oversight Committee

If the local sales tax measure is approved by the voters in November the City Council will appoint residents to a citizen oversight committee. “This committee would provide citizen oversight in collaboration with the City’s Administrative Services Department to ensure fiscal accountability, transparency, and to verify that sales tax funds are being used appropriately to meet residents’ priorities. A report will also be made to the INRAC so that the City’s infrastructure needs are continually addressed by the new funding,” the staff report said.

Public Comments

Prior to Council discussion of the item, the City Clerk read the 8 public eComments that had been submitted by residents, with half supporting and half opposing the proposed sales tax.

A few spoke in person at the meeting, and opinions were split.

Sean Paden said that the City hasn’t had a balanced budget for years, and that the solution is not raising taxes, but rather curbing pay and benefits to City employees, including pension reform.

Tanya McCrory said that the City “has not been good stewards of our tax money historically” and that the proposed general sales tax ignores the infrastructure recommendation. She suggested pension reform and eliminating police overtime.

Chair of INRAC Thad Sandford said that although his committee sent a letter opposing the general tax, he supports the general sales tax because of the City’s revenue needs.

Arnel Dino, also a member of INRAC, said he still supports the special infrastructure tax.

Council Discussion

Prior to voting, Council members gave their thoughts on the proposed sales tax ballot measure.

Mayor Jennifer Fitzgerald said that in her 8 years on City Council, other methods to help the City’s financial situation have not been enough, or the City has been unwilling to do them.

“There should be things we can do without raising sales tax, but this community has proven to me time and again that they’re not willing to do them. I think it’s time to let the people decide what level of service to they want from this City,” Fitzgerald said.

Mayor Pro Tem Jan Flory said that the sales tax should be put to the voters “to let them decide what kind of community they want to live with. Do they want to live in a community that doesn’t have those quality-of-life features they count on so much—the library, the museum, community center, parks, etc.”

Councilmember Ahmad Zahra pointed out that a sales tax is regressive, meaning it disproportionately impacts lower-income residents.

“But so does poor infrastructure; a flat tire from a bad road can be a major economic hardship on a low-income family. What COVID-19 has shown is that we have no resiliency as a City…Ultimately it is not my decision, it is the peoples’ decision. All we’re deciding today is to send that question to the people to ask, ‘Do you want to do this or not?’” Zahra said.

Councilmember Jesus Silva said that this was a “tough call” but that “We need it for our roads and to address homelessness…I know raising any kind of tax is hard, but I think it’s the best thing for our city right now.”

Councilmember Bruce Whitaker, the lone “no” vote, said that the solution is to “find ways for our “City staff to increase productivity” and he criticized “the propensity of government to overspend its wherewithal and…to take it out of the pockets of the citizens you serve. We’ll get the ballot test on this,” Whitaker added.

About TBWBH Strategies

Council also voted 4-1 (Whitaker “no”) to approve a $125,000 contract with Terris Barnes Walters Boigon Heath, Inc. (TBWBH Strategies) for public education services about the measure. On their web site (www.propsandmeasures.com), TBWBH Strategies describes itself as “California’s leading revenue measure strategy and communications consulting firm…We’ve passed over 430 successful bond and tax measures, providing more than $20 billion in voter-approved funding for facility and infrastructure improvements and quality public services in California.”

According to Gov. Code Section 54964, “An officer, employee, or consultant of a local agency may not expend or authorize the expenditure of any of the funds of the local agency to support or oppose the approval or rejection of a ballot measure, or the election or defeat of a candidate, by the voters.”

According to a staff report, “The goal is to educate the residents about the needs of the City and let them ultimately decide. Thus, the purpose of this consultant is to simply educate voters on the City’s financial condition, service needs and infrastructure needs while being compliant with all legal requirements.”

Three public comments on this item were opposed to hiring a consulting firm.

“Why does the City need to spend $125,000 to convince voters that they want a general sales tax?” Jane Rands said.

“I find the idea of paying for you guys to get this tax passed very uncomfortable. It sounds like legally you can’t actually advocate for the tax, and yet I’m having a difficult time drawing a distinction between spending $125,000 that very much needs to be spent in other areas of the City to advocate for this tax, so it sounds like you’re following the letter but not the spirit of the law,” another commenter said.

Deputy City Manager Antonia Graham said, “The reason for an outside consultant is that the City cannot advocate for a sales tax measure. Having a third party helps us to ensure that we do everything legally and that we are in accordance with the government code. There have been cities that have done this on their own to educate their residents, and they have gotten in trouble with the State.”

“It’s very important that we educate and not advocate,” Domer said. “This is a firm that is knowledgeable and recognizes that line to make sure that a city stays within it.”

Councilmember Bruce Whitaker, who voted against the item, said, “The way to communicate with the residents is through performance and results. That speaks volumes and builds the kind of confidence you need to pass something like this. Using outside consultants has the opposite effect, generally.”

12 replies »

  1. I lived in Fullerton for 20 years and not much changed about the streets maintenance always are with holes and in bad shape, I don’t think that Fullerton improves his budget disbalance with the higher sale tax in the area more than La Habra 8%. I am at the border with La Habra and Brea, we are forget to make works for the Council, if the Measure S is approved I will buy in the other cities.

  2. The proposed ballot statement is a sales pitch. The argument in favor is superfluous as it will include every selling point that’s already on the ballot.

    It’s a felony to use public moneys for a “purpose not authorized by law.” (Penal Code 424(a)(2)). The law, AB-195, Elections Code 13119(a), (b), and (c), Elections Code 9051(c) via Elections Code 10403(a)(2), and the California Supreme Court (Stanson v. Mott and others) all “prohibit” using the ballot (paid for with public moneys) to promote a measure.

    It’s a misdemeanor (Elections Code 18401) and perhaps even a felony (Elections Code 18002) for the registrar (Neal Kelley) to print and circulate ballots that don’t conform with, among other statutes, Elections Code 13119.

    If this were to pass, any Fullerton voter could file an election contest special proceeding (not a civil action) to ‘vitiate’ (word from the California Supreme Court, meaning cancel) the election.

    Who wrote the ballot statement? Not the city council. It was FM3, who sells themselves as helping local government agencies win ballot measure election.

    Do you think anyone on the city council has read the law on ballot statements? No. They’re just there to pass anything that gets them campaign donations to win the next election.

    To top it off, you have the king of ballot-measure-election-fixing, Neal Kelley, as the Registrar who put this on the ballot exactly as it appears, even though it violates, in addition to Elections Code 13119(a), (b), (c) and Elections Code 9051(c), Elections Code 9051(b) via Elections Code 13247 imposing a 75-word limit on the ballot statement.

    You see, the city knows that Kelley will not count the 9-word (Elections Code 9) title of the 85-word ballot statement in the 75-word count. Why? Because, Kelley always puts his own prejudicially favorable title on the ballot for every local government. When the city supplies its own title, Kelley defers to the provided wording, saving him the task of writing it himself.

    This is the corrupt election establishment that you (the voters) in Orange County have allowed to exist for years and years, with your purported Board of Supervisors allowing Kelley to do whatever he wants — wink, wink.

    Wake up people.

    As Saul Alinsky says, “use their own rules against them.” In this case, that would be election law. You can prepare your election contest now and file it the day the election is canvassed.

  3. Please put a detailed report in the Observer as to how much funding is exactly currently available to cover the cost of each of the various items a new tax is expected to cover and how much more is needed to achieve that goal (especially infrastructure). How much has been spent on road repair with funds from taxes previously ear marked for that purpose.

    More public information is needed
    E. Bockian


  4. I grew up in Fullerton– went to Sunny Hills not long ago– so I know that funding for our community has never really been enough. And now we are facing unprecedented budget cuts so local funding is even more critical. However, it’s important for voters to remember that they do not have to carry the tax burden all by themselves. This November, passing Prop. 15 will generate local and reliable revenue by making large corporations pay their fair share of property taxes, while keeping protections for homeowners, renters, and small businesses. This statewide ballot measure will reclaim $12 billion a year for our schools and local governments, without having to raise taxes on people like you and me. In fact, the measure will generate $8.5 million every year just for Fullerton. That’s why I hope other folks from Fullerton join me and vote YES on Prop. 15 this November so we can stop relying on regressive taxes and instead generate stable and long-term revenue for our local public services and schools.

  5. How about we do something about the roads? The streets in Fullerton are the worst in Orange County by far. And my neighborhood has no working street lights and hasn’t for over six months. If 1.25% sales tax gets me drivable roads and working street lights I’m all for it.

  6. 1.25% of little is very little. Unless you get businesses open and promote more businesses in Fullerton you won’t get much. Shutting down businesses is self-defeating. You should allow businesses to open with reasonable safety guidelines. Stimulate a “buy in Fullerton” program.