Pasadena eyeing sales tax increase to bring in $22 million a year

Facing a deficit of $12 million by 2024, Pasadena officials are considering asking voters to approve a sales tax hike on items sold in the city to close the gap and avoid layoffs.

Mayor Terry Tornek and City Manager Steve Mermell are suggesting putting a 0.75 percent sales tax on the November ballot which would generate as much as $22 million in its first year.

On a $30,000 purchase, the new tax would add $225. Hotels and restaurants would generate the largest share of the annual revenues, according to a staff report.

“We’ve really come to the point where we’ve cut, and we’ve cut, and we’ve cut for years, and there are no simple solutions anymore,” Mermell said.

City officials say the new tax dollars would allow the city to maintain its current level of services, invest in infrastructure repairs and provide a portion to the local school district. The funds could help the city come up with the $100 million needed to fix sidewalks and aging fire stations, officials said.

Since the Great Recession, Mermell said the city has cut $19 million from its budget and eliminated 123 positions. Last year, the city eliminated $4 million in costs, mostly from not filling vacant positions.

The city has been able to maintain services so far, but the next reductions, if necessary, will hit harder and be more noticeable to residents, Mermell said.

Pasadena’s budget predicts a $3.5 million deficit next year and up to $12 million in 2024. The city would likely need to tap into its reserves to balance the budget if officials do not find a new revenue source.

To put the tax on the November ballot, Pasadena has to come up with a plan by June. The idea was greeted with hesitation Monday night as City Council members questioned whether a sales tax was the best route and if it’s appropriate for the council to raise money for the schools.

Councilman Victor Gordo said he needed more in-depth information on the alternatives, such as a property tax. He also questioned what mechanisms would be in place to ensure the school district has accountability in how it will use the funds.

“There has to be some real analysis related to what we can and can’t do, and how much it will raise,” Gordo said.

Tornek said there are fewer alternatives than might be expected. On the topic of accountability, he argued the school district’s board would have to answer to voters on how the money is used.

But Tornek ultimately conceded to not taking any action on the tax at Monday’s City Council meeting. He moved to table the matter until staff could come back with answers to questions his colleagues raised.

“I think this just deserves a little more cooking,” Tornek said.

Before the council moves forward with the tax, he said he also wants to see community meetings throughout the city.

Though still early in the process, the Pasadena Chamber of Commerce expressed concerns about how the tax could affect companies that sell high-end items in the city.

In a letter, chamber representatives urged the City Council to take a measured approach to the topic, as the deadline is months away.

“If this doesn’t pass, what specifically are you going to do to balance the budget?” Paul Little, chamber director, asked. “Perhaps voters would prefer that to an increase in sales tax that could jeopardize local employers and local jobs.”

The city did not have specific plans for cuts yet, but Mermell said officials expect to eliminate more vacant positions in the next budget cycle to make up the $3.5 million gap. Beyond that, the city is looking at services, such as the advanced life support provided by the Pasadena Fire Department, to see if a scaled back versions could save money.

Original Article Courtesy of Pasadena Star News.