The Goleta City Council has indicated it’s open to implementing a new sales tax to increase revenue for city projects.
The council, in a workshop Thursday, considered six potential revenue enhancement options put forth by city staff and consultants.
“We have such a long list of unfunded or underfunded needs that our residents deserve and things that are being asked for that we need to provide for them,” Councilmember Kyle Richards said.
The council considered:
— Transaction Use Tax: An additional sales tax levy on top of the local sales and use tax with a projected annual revenue is $2.2-2.4 million for every 0.25% increase.
— Utility User Tax: Imposed on residents and businesses within the city on the consumption of utility services such as cable, gas, electricity, telephone and more with projected annual revenue of $4.7 million.
— Parcel tax: Imposed on a parcel of property within the city of a fixed amount with an estimated annual revenue of $960,000.
— Transient Occupancy Tax: Levied on people staying less than 31 days in hotels, motels or other similar venues with projected annual revenue of $920,000 for each 1% increase.
— Business License Tax: Imposed on all businesses that operate within the city on top of an already levied business license fee with projected annual revenue of $2.2-3.3 million.
— Documentary Transfer and Real Property Transfer Tax: Imposed on all property owners who transfer interest in real estate within the city with projected annual revenue of $300,000 for each additional %0.55 increase in the tax.
Mayor Paula Perotte and other council members indicated they would be open to exploring the transaction use tax, otherwise referred to as a sales tax, noting it would apply to both residents and visitors.
Other nearby cities have adopted a transaction use tax, including Carpinteria, Guadalupe, Lompoc, Santa Barbara and Santa Maria, said Ken Duran, a senior adviser with HdL Companies, an economic consulting firm. He said this type of tax is one of the most likely to be passed by voters.
Goleta’s sales tax sits at 7.5%. There is a cap of 9.25%, Mr. Duran said.
According to a staff report, the transaction use tax could generate up to $9.3 million depending on the percent of the tax.
A supermajority of the city council (four of the five members) would be needed to place the tax measure on the ballot. Then it must garner at least two-thirds of voter approval for special purpose funding or a simple major for general purpose funding in order to pass.
Councilmember Roger Aceves said his support of the sales tax would hinge on where the funding would go.
“I think it’s very important for the public to know why we need it, where we’re spending it, and … then hold us to the promise of where we’re going to spend it,” Councilmember Aceves said. “It’s never a good time to do a tax — I don’t care what year it is — but this one here has the potential of going through.”
The utility user tax has more latitude. The council could select which utilities are taxed and the rate for each. Santa Barbara has a 6% utility user tax on all utilities.
A parcel tax must be for a specific purpose, such as public safety. The collection would be handled by the county, then distributed back to the city. Goleta already has a library services parcel tax.
Goleta already has a transient occupancy tax of 12%, which coincides with the statewide average.
Mr. Duran said the business license tax would be the least regressive option out of the six proposed, but it would also have the highest cost of administration because the city would need to create the structure and collect the tax, possibly by using a third party.
But Mayor Perotte said she did not support that option.
“For businesses, we want our small businesses to come, and we want to be known as a friendly city to mom-and-pop stores, and we don’t want to make it harder,” the mayor said.
Michelle Greene, Goleta’s city manager, told the council the city has seen the costs of services, such as its contract with the Santa Barbara County Sheriff’s Office as well as animal and library services, have risen.
A draft spending plan identified about $3.3 million needed for Goleta’s pavement program, $1.7 million for creek and watershed master plan implementation, $800,000 for critical maintenance backlog and $760,000 for affordable housing and a homelessness strategic plan implementation.
“Roads aren’t exciting to make as a top priority, but really it’s needed,” Mayor Perotte said.
The council would need to adopt a resolution approving a ballot measure with a tax change around June, according to a projected timeline. Voters could then decide on the proposal on Nov. 8. email: firstname.lastname@example.org