How did Pleasanton get here?
That was one question posed by a resident during a City Council meeting Tuesday when the panel gave city staff the green light to explore placing a possible tax measure on a ballot next year.
City officials will next take the temperature of the community through public opinion polls and other informational campaigns to determine what type of measure — local sales tax, hotel tax or bond, among possible revenue options — may be successful with voters.
The city is studying a tax or bond measure as it stares down projections that show the city in coming years spending more money than it takes in.
“Why are we in this situation?” Mayor Karla Brown said at the meeting. “One of them is COVID.”
Pleasanton lost $11 million in hotel tax revenue during the last three years of the coronavirus pandemic, Brown said, and the industry has been slow to recover to pre-pandemic levels.
Sales tax revenue has not been high enough to meet the city’s needs, either, Brown said.
“If you’ve been by the mall recently, you know the mall is very slow, and it has not brought in the sales tax that we expected,” the mayor said. “Costco has not come online. It’s way behind schedule for many reasons; the city is not one of them, but that was estimated at least $1 million a year in sales tax revenue.”
Officials also pointed to neglected city infrastructure — such as water pipes in need of repair or replacement — rising costs of goods, services and salaries; and pension obligations that aren’t expected to stabilize until about 2031 as reasons the city is looking at possible new revenue sources, fee increases for city services and programs, and ways to cut costs.
“Salary savings and rainy day fund — all those things are getting tighter and tighter and dwindling,” City Manager Gerry Beaudin said at the meeting. “Our goal here is to identify a new way to pay for identified needs.”
The exploration of a revenue measure — which could appear on the November 2024 ballot — comes as the city is mired in bitter contract negotiations with the Pleasanton Police Officers Association, which has declared an impasse in negotiations as it seeks pay raises and retention bonuses for officers. It also comes as the city is proposing raising water rates significantly, starting with a possible 30% increase later this year. Mayor Brown noted efforts to address city wells found to be contaminated with PFAS — or forever chemicals — could cost $35 million to $50 million.
The city’s general fund budget totals about $150 million, according to city budget documents. It funds city services such as staff payroll, police, fire, recreation, and repairs and maintenance, among other services. Personnel costs account for the vast majority of general fund spending.
Property taxes bring in nearly 60% of the city’s general fund revenue. Sales tax is the next highest funding source, coming in at about 17%.
While Pleasanton has not before tried to establish a local sales tax to bolster its general fund, many cities in the region have. Voters last November in Walnut Creek, for example, approved Measure O, a half-cent general sales tax. And in Union City, voters renewed a half-cent sales tax that city officials said benefits 911 operations, firefighting services and police patrols and other city services. Hayward and San Leandro also have instituted local sales taxes.
Bonnie Moss of the political strategy and communications firm CliffordMoss, which has been hired by the city to analyze revenue options, said billing a sales tax measure as benefiting public safety services is “really very popular with voters.”
Taxpayer watchdogs note that there are two types of local sales tax initiatives. Marcus Crawley of the Alameda County Taxpayers Association said a general sales tax requires only a simple majority to be approved, and the revenue gained can be spent at the City Council’s discretion. A special sales tax requires two-thirds voter approval and must identify specific purposes for the money raised.
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Crawley said governments try to make general tax proposals seem special, and special tax proposals vague enough so the added revenue can be spent more broadly.
“Typically, the voters are bamboozled into voting against their best interests because the gimmicks are so enticing and the new tax campaigns are well funded,” he said.
The Pleasanton City Council has not yet decided on whether it will place a revenue measure before voters.
At the council’s meeting, Vice Mayor Jack Balch noted the city’s expenses are rising faster than its revenues, and he said he’s heard from constituents who believe the council has been “a little bit off on the priorities that we have set.”
He said he’s viewing a potential ballot measure in that light.
“I am concerned that we will need to rebuild trust with our community before we can potentially see this as a success,” Balch said. “It doesn’t mean it’s impossible. It just means we may have a bit of water we need to carry to rebuild that trust.”