SAN DIEGOSAN DIEGO — The San Diego County Taxpayers Association is formally asking San Diego leaders to negotiate with it over a possible ballot measure that would ask city voters to approve a local sales tax surcharge.
Such a surcharge, if enacted, would make a huge impact on the city’s $2 billion annual operating budget. A half-cent increase could generate about $200 million per year, while a full cent could generate about $400 million.
City leaders haven’t said publicly that they are considering such a ballot measure, and it hasn’t been discussed during any City Council hearings.
But the taxpayers association said city officials, led by Councilmember Raul Campillo and Mayor Todd Gloria, have been engaged in ongoing closed-door discussions about a revenue ballot measure in November 2024 — likely focused on sales tax.
Gloria and Campillo stopped short this week of confirming that, but when asked about the request from the taxpayers association both acknowledged they are exploring new ways to boost city revenue.
“Over the nearly three years I’ve served as mayor, we’ve been working to reverse decades of underinvestment in our streets and other infrastructure and in the workforce required to keep our city functioning at the level San Diegans deserve,” Gloria said by email. “I’m open to ideas to ensure we have the funds to continue improving service levels and look forward to a broad community discussion over the next few months to determine what measures make the most sense.”
Campillo’s chief of staff, Michael Simonsen, said his boss is always looking for opportunities to boost quality of life for residents by paving more streets, hiring more police officers and firefighters and boosting parks and libraries.
“Councilmember Campillo is currently doing his due diligence and exploring all options to forge a path forward to improve the quality of life for all San Diegans,” Simonsen said.
A ballot measure to raise sales tax would need approval from a simple majority of voters if the money would be used for general city expenses. If the measure proposed devoting the money to a specific purpose, however, two-thirds approval would be needed.
The City Council would likely vote early next year on whether to place such a measure on the November 2024 ballot. Only a simple majority would be needed.
However, the council might have eight instead of nine at that time. Councilmember Monica Montgomery Steppe is in a Nov. 7 runoff for county supervisor, and if she wins, her council seat won’t be filled for several months.
Some other council could be reluctant to place the measure on the ballot because they are running for re-election next November. That could including two in districts whose voters are considered particularly anti-tax by political consultants — Marni von Wilpert in north inland District 5 and Joe LaCava in north coastal District 1.
San Diego wouldn’t be the first city in the county to approve a local sales tax surcharge. Nine other cities have previously approved surcharges of either half a cent, three-quarters of a cent or a full cent.
Those surcharges increase sales tax in those cities beyond the countywide rate of 7.75 percent. The state rate is 7.25 percent, but it’s a half-cent higher within the county because of the voter-approved Transnet surcharge to pay for transportation projects.
The rate is 8.25 percent in Oceanside, El Cajon and Vista, where city voters have approved half-cent increases. The rate is 8.5 percent in La Mesa, where voters approved a three-quarter-cent increase.
And the rate is 8.75 percent in Chula Vista, National City, Del Mar, Solana Beach and Imperial Beach, where voters approved full-cent increases.
Cities that approve full-cent surcharges are essentially doubling the sales tax revenue they receive.
Of the 7.25 percent state sales tax, 6.25 percent goes to Sacramento and 1 percent stays with the local jurisdiction. By adding a full cent, a city doubles the local take from 1 percent to 2 percent of all sales.
San Diego has a lower sales tax rate than the state’s other large cities. The rate is 9.5 percent in Los Angeles, 9.375 percent in San Jose and 8.625 percent in San Francisco.
The boost to San Diego’s finances from a sales tax increase would come on the heels of city voters approving a ballot measure last November that allows the city to start charging single-family homes for trash and recycling services.
That ballot measure, Measure B, is expected to generate roughly $80 million a year in new revenue for the city.
Other city tax increases have been considered in recent years, including a general obligation bond that would have raised property taxes in the city to pay for infrastructure projects.
No such bond was ever put on the ballot, because it would have required approval from two-thirds of city voters — a difficult threshold to meet in San Diego.
There have also been several attempts to increase the city’s hotel tax rate, which is lower than most other tourist-friendly cities. One such attempt is still mired in litigation and court rulings.
A proposed parcel tax to raise money for parks and libraries is also mired in litigation. Proponents say they got enough valid signatures for the measure to appear on the November 2024 ballot, but the city clerk disagrees.
City officials have also considered recently paying for billions in stormwater projects with either new parcel taxes, property-related fees, special assessment taxes or other options.
Critics of sales tax increases say they fall more heavily on low-income residents than property tax or parcel tax increases or imposing local income taxes. Other critics note that sales tax increases fall more heavily on local residents than hotel tax increases, which are paid mostly by tourists.
In addition to requesting negotiations with the city, the taxpayers association wants any sales tax increase to have a sunset clause, possibly of four years, after which voters would have to re-approve it.
The association also wants city officials to define performance targets they are trying to meet with the new revenue, particularly on homelessness, housing and infrastructure.
“We want to frame some important principles that we think are important to taxpayers,” said Haney Hong, the association’s chief executive. “We need some protections because there’s not enough public confidence right now in the city’s ability to deliver core municipal services.”
Charles Modica, the city’s independent budget analyst, said a sunset clause would eliminate one of the chief advantages a sales tax increase has over a bond: A sales tax increase would be a continuing revenue source.
“A short term revenue source could certainly help fund various city projects, but an expiration date (especially one in the near-future) means that the revenue would be better used to fund one-time projects/programs, as opposed to ongoing services that have funding needs beyond the sunset date,” Modica said by email.
Modica also questioned whether the taxpayers association’s request for performance targets on things like homelessness would effectively raise the approval threshold to two-thirds by devoting the money to specific purposes.
“I agree that a performance plan for and tracking defined progress towards homelessness/housing/infrastructure is important,” he said. “I don’t know whether it can be part of a ballot proposition without turning that proposition into a special tax. More analysis or legal research would be needed on that.”
