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Pleasanton residents appear poised to be voting on a sales tax increase this November, with the City Council getting set to decide next Tuesday about whether to confirm the revenue measure for the general election ballot.
Even though the council has not made any final decisions heading into the July 16 meeting, City Manager Gerry Beaudin sat down for an interview with the Weekly to respond to criticisms about the proposal and explain why residents should consider supporting the tax increase, even those who don’t like it.
“There’s a lot of folks who are looking for the one, quick, easy fix or the one reduction or the one solution,” Beaudin said this week. “The half-cent sales tax is the thing that is most likely to bring stability to our finances in the near and medium term.”
And because a supermajority of four council members need to vote yes at Tuesday’s meeting in order to place the measure on the ballot, it seems likely that the measure will move forward given that all the council members, except for Jack Balch, voiced their initial support of the tax increase during the June 18 council meeting — Balch said the city should take more time before pursuing the revenue measure.
According to the city staff report prepared for next week’s meeting, the city government is facing a structural budget deficit where expenses have and will continue to grow faster than the city’s revenues, which means less funding for city-provided services and programs.
The reasons for the deficit, according to city staff, range from slow real estate developments, declining retail sales activity and increasing operational or contract service costs, to rising personnel costs, unfunded mandates from the state and increasing insurance costs.
One notable loss in the city’s budget was an over $11 million drop in hotel tax revenue during and after the pandemic because of the fact that hotels have not rebounded to their pre-pandemic levels, according to city staff.
Additionally, the city’s infrastructure and facilities are aging and need to be replaced or rebuilt — however the city currently does not have the funding set aside to do so.
One of the other major reasons the city is facing such a deficit is pension liability cost increases, which the city has been trying to reduce, according to Beaudin. He said because the city has legal obligations per state law to pay these pension costs, the city created the Section 115 Pension Trust Fund to pay down the city’s unfunded liability and proactively stabilize the city’s pension costs in the long term.
“The pension obligation has grown over time for cities across the state, but it is an obligation,” Beaudin said, adding that the pension does help attract quality employees.
However, he said while pension costs have been a big factor for the city’s financial situation, he said there are many other factors as well.
But what is the city’s financial situation?
The city has been forecasting an average budget shortfall of about $13 million every year for the next eight years — if there is a financial recession then that annual deficit is projected to exceed $22 million. According to the staff report, the cumulative deficit over the next eight years is projected to exceed $180 million.
That’s why in 2023, staff began polling residents to see what their priorities were and about new potential revenue streams. Last December, the council reviewed the information and began considering the half-cent sales tax increase.
If the measure were approved by voters, the total sales tax in Pleasanton would go from 10.25% to 10.75%, which means that for every $100 of taxable purchases, consumers would pay 50 cents in additional tax.
“It’s a half-cent increase — what you physically feel — because the tax rate goes up by a half percent,” city communications manager Heather Tiernan told the Weekly.
The proposed tax would be paid by all consumers purchasing goods in the city and the revenue would remain in Pleasanton, according to the staff report. Prescription medicine, groceries, rent, mortgage payments, utilities and any digital goods would be exempt from the tax.
It would also sunset in 10 years and be subject to audits and oversight — an ordinance will be up for approval on Tuesday that would make the council form a five-member citizens oversight committee to oversee the use of the revenue funds.
“The proposed measure addresses areas identified by voters as top priorities and would maintain essential services such as 911 emergency response and police and fire protection services,” according to the staff report.
Emergency response services and public safety were the most important priorities for residents according to a previous community survey conducted by the city.
According to the staff report, the city has implemented cost-saving measures — which Beaudin said has been saving the city millions of dollars — such as merging departments; providing lower pension and retiree medical benefits to employees; limiting the number of budgeted general fund positions; and reducing costs related to contracted services or new department programs.
While some residents have said in previous council meetings that the city spends too much on professional service contracts and should cut those instead of seeking a tax increase, Beaudin said contracted services are cheaper than having to pay for employees to do jobs that aren’t needed on a regular basis and the city is cutting back on contractors when they can either way.
Recently, the City Council also approved $2.5 million in reductions from the current fiscal year’s budget, which included the deferral of capital improvement projects such as the highly contentious skatepark project at Ken Mercer Sports Park and the Century House renovation.
Residents during the past year have been vocal about the city putting money toward those projects being one of the reasons why the city is in this financial hole and have said they don’t trust the city with using more of their money if the tax measure passes.
However, Beaudin said the city’s goal is to take care of residents’ money.
“The city of Pleasanton is committed to spending the community’s money responsibly,” Beaudin said. “We’ve been very focused on our spending and reducing costs, at the same time as trying to identify new ways to generate revenue for the city.”
Beaudin said while those non-essential projects are currently shelved, the city will look for other ways to fund those projects in the future through outside funds, but he stressed that the money from the tax increase measure will be solely for the essential services listed in the ballot language.
“We’re focused on infrastructure projects and things that keep our existing system working,” he said.
The proposed ballot language reads as follows: “To maintain city services and prevent cuts, such as police and fire protection; 911 emergency response; disaster preparedness; pedestrian safety; park maintenance; pothole repair and street maintenance; recreation programs; open space preservation; and other general government uses; shall the City of Pleasanton’s measure to establish a half-cent sales tax, providing approximately $10,000,000 annually for 10 years, keeping all funds local, with annual audits, public spending disclosure, and oversight, be adopted?”
According to data the city received from one of its consultants that conducted a poll of likely voters from May 15-21, 58% of those who were surveyed supported the ballot language as presented, which is above the 50%-plus-one majority vote needed for the measure to pass in the November election.
The polling results did show that support decreased to 49% with 14% of respondents saying they were undecided after the same folks who were surveyed heard negative or opposing information on the measure. However, according to the staff report, given the 4.9% margin of error for the study the research consultant said a sales tax measure “may be viable for the November 2024 election.”
Beaudin said while the revenue measure is the city’s best plan, staff have been working on a backup contingency plan, which would make significant cuts to city departments, that they presented to the council during a special meeting workshop on May 21.
That plan, which the council did not approve, included reduced library hours, eliminating funding for crossing guards, closing one of the fire stations in Pleasanton and reducing police programs, among other cuts in the next two-year budget cycle.
Even though Beaudin said the tax increase wouldn’t completely cover the $13 million annual deficit every year, it would make it so Pleasanton wouldn’t have to make such drastic cuts as outlined in the contingency plan.
“This is really an amount of money that helps to stabilize the city financially at a time when we know that without it … more significant cuts will be necessary,” Beaudin said.
He said that while the city has heard a multitude of suggestions from residents to sell property, cut funds for programs, or make reductions to other areas of the budget to save the city some money, these reductions are small in comparison to the overall deficit.
“There are a lot of other things that we need to do and continue to work on … but what I would say is there’s no one thing that is going to fix this issue for us,” Beaudin said. “The half-cent sales tax is a really important tool that we have available to control our destiny here in the city.”
Pleasanton Mayor Karla Brown also told the Weekly that Pleasanton has amazing amenities and services that come from a well-funded budget and that while she has previously voted to make reductions in the city’s budget, this year is different.
She said even with all the cuts the council has already made to CIP projects and other areas of the budget, it’s still not going to be enough — which is why she thinks it’s time to see what the voters have to say about supporting their city and their quality of life.
“I wish there were other options, but there are not. In my nearly 12 years as an elected official in Pleasanton, I have never previously supported a request for financial help from our residents at the city, but now it is time,” Brown said. “I support a ballot initiative to ask the voters if they will support a half-cent tax, so we can continue to maintain the high quality of services and community amenities that we have come to expect and enjoy in pleasant Pleasanton.”
“The city of Pleasanton is committed to spending the community’s money responsibly,” Beaudin said. “We’ve been very focused on our spending and reducing costs, at the same time as trying to identify new ways to generate revenue for the city.”
Any funding spent (or planned to be spent) by the city for a “Climate Action Plan” is not responsible usage of the community’s money. Just the opposite.
It’s throwing it away so micromanaging elected officials can feel good about “saving the world” all while the state still struggles to keep the lights on by relying on unreliable energy sources.
The language proposed is nothing more than fear mongering. We (the city) are threatening you to pass the tax measure or we will make cuts to the PPD. It won’t happen. How about cutting out the budget set up for travel? They have not dig deep enough yet to ask for a new tax. And there is a loophole in the measure language for city to spend how they wish. Read it carefully.
What is “and other general government uses?”
Gerry Beaudine, please provide specific detail what that is.
What the city did not mention is that California cities such as Pleasanton already rank as the highest sales tax rates in the country. Once these new rates are approved, they will never go away despite any economic recoveries. Much of the revenue losses and cost increases were predictable by 2020. What steps did the council take to mitigate these impacts over the past 4 years? I recall spending over the past few years on non-essential activities such as remodeling historical homes. These types of expenses should have been deferred until revenues were forecasted to increase.
Now, the council hastily suggests cost reductions that impact taxpayers in the worst way. It is regrettable that only Jack Balch has the temerity to suggest that the council and city management investigate alternatives prior to the easy path promoted by the mayor and remaining council members of asking taxpayers to fund the city leaderships’ lack of vision.
“Slow real estate developments” is one of the reasons given for the lack of revenue, however some members of the city council have fought the state’s requirement to meet Pleasanton’s housing allocation. By being proactive in this area we can have more control over the housing that is being built which will lead to more revenue. The Stoneridge Mall redevelopment that was approved over a year ago hasn’t progressed. I would like to see Pleasanton facilitate and coordinate the various developers so this project can move forward, which would also, in time, provide more funds to the city.