During a contentious meeting Wednesday evening that was packed with residents, business owners, and city employees, the Westminster City Council voted to place a one-cent sales tax increase proposal on the November ballot.
If voters approve the tax plan, city officials estimate it will bring an additional $12-to-$13 million into the general fund each year and help the beleaguered city stave off a bankruptcy that is almost certain without a change in the city’s revenue stream or draconian spending cuts.
The crowd, which filled the council chambers and spilled into the hallway, was largely in favor of the ballot proposal, which was passed in a 4-1 vote. Councilman Tyler Diep cast the only dissenting vote.
“I want to give you money to give me services. You don’t see packed houses like this very often,” said Steve James, a city of Long Beach police officer who lives in Westminster.
Westminster has faced an acute budget crisis every year since the state ended the use of redevelopment agencies in 2011. Year after year, the city has made cuts and drawn on its rainy day fund to pay off its annual deficit, with little discussion of long-term solutions.
Councilwoman Margie Rice brought up the idea of a sales tax ballot measure late last year, yet it gained little traction at the time. Only in the past week — after staff outlined massive service reductions that would accompany a $3-million budget cut proposed by Diep — did enough council members shown signs they might support the proposal.
Key to Wednesday’s decision were votes by Mayor Tri Ta and councilman Sergio Contreras to support the ballot measure, despite their personal opposition to a sales tax increase.
Ta’s vote was on the condition that, if approved, the tax would automatically expire after six years.
“The long-term impact of a sales tax increase will be severe unless it is temporary…many businesses will hesitate to move into Westminster or stay in our city,” said Ta. “I’m willing to vote to put a measure on a ballot…only because I respect the voters’ rights to decide on the tax.”
Ta’s comments came after more than three hours of blistering criticism of the council from residents who support placing the tax increase on the ballot.
“[This] is not a vote to raise taxes…the vote calls to have the issue to be placed on the ballot for me and other citizens to have a voice on,” said resident Al Panella. “After it’s on the ballot, oppose it if you wish. But don’t take our voting rights away as citizens.”
Many residents reacted harshly to a robo-call and mailer paid for by the Orange County Taxpayer’s Association that warned of an impending tax increase.
“This flier is full of lies…it’s trying to scare the people of our city,” said Robert Benoun. “By not putting this on the ballot, it can come across that you think you’re smarter than the city and the people who elected you.”
Rice and councilwoman Diana Carey, proponents of the sales tax ballot measure, say the city has already made devastating cuts to its budget and cannot make enough cuts to save the city from bankruptcy. With the city’s long-term deficit steadily increasing, they point to the city’s historic revenue problem, due in part to a property tax rate that was lowered just before the state froze property tax rates in 1978.
Don Anderson, a member of the citizen financial task force that was appointed by the council to compile a list of recommendations, said the sales tax increase is the city’s most feasible, long-term solution.
“If the tax increase isn’t approved, bankruptcy isn’t a solution. It restructures debt, it gets us nowhere,” said Anderson
Many speakers – including former councilman Tony Lam, Westminster School Board member Jamison Power, and Roxanne Chow, an aide to Asm. Tom Daly – spoke in favor of placing the tax increase on the ballot because they were alarmed by nearly $2.1 million in potential cuts to the Police Department outlined in Diep’s proposal.
“I think now is literally the worst possible time to consider cutting public safety,” said Power, recounting an incident where police apprehended two burglars in his home while his wife and infant son were on their way home. “Last year crime was up nearly forty percent.”
With Ta, Carey and Contreras all running for re-election in November, the stakes are high, and the sales tax measure is like to draw money and influence from political interests outside from outside groups.
Forty five residents called City Hall ahead of the vote to oppose the sales tax measure, and in addition to the OC Taxpayers’ Association, the Orange County Business Council also submitted a letter of opposition.
Many who oppose the tax measure questioned why the council has proposed two extreme solutions – a tax increase and drastic cuts – without discussing the other alternatives that were recommended by the financial task force. Those recommendations include outsourcing the city’s police department, selling the water utility, relocating city hall and increasing fees and citations.
“It is an economic rule that higher costs will drive consumers away. They will find their way to businesses outside the city of Westminster,” said Kimberly Ho, a member of the task force who is running for city council for the first time in November.
Resident Roger Fierce, who is opposed to both the sales tax measure and the proposed $3 million cut, and urged the council to look for alternatives. He argued the city’s budget situation is not as dire as its consultant has projected.
“We would not fall below the minimum reserve threshold for three years…this is not being broke or bankrupt,” said Fierce. “No cuts, no tax, hold our expense growth to two percent.”
Carolyn Cavecche of the OC Taxpayers’ Association said a sales tax increase would punish residents for the City Council’s past mistakes.
“Increasing the sales tax is a regressive tax, hurting those who don’t have the ability to move elsewhere the most,” Cavecche said.
Several car dealerships warned council members that the measure could discourage potential buyers or drive dealers out of town, and ultimately hurt the city’s sales tax revenue by limiting the number of cars sold in Westminster.
“New vehicle sales would decrease by 30 percent. Orange County is a highly competitive marketplace and consumers will purchase in other cities as their perception would be that they would be paying one percent more for their cars,” said John Sackrison, executive director of the Orange County Automobile Dealers Association.
Carey, meanwhile, called that argument an example of “truthiness” – referencing a term coined by television comedian and satirist Stephen Colbert about arguments that ‘feel right’ but lack evidence or factual support.
“You pay sales tax where a car is registered…I could have bought it in San Francisco or San Diego and we would have gotten exactly the same thing,” Carey said.
In his argument against the tax proposal, Diep placed partial blame for the city’s financial woes on his colleagues’ approval of recent pay increases negotiated by city unions.
“How do you look at voters and say, ‘give me more money so that we can continue vital services’ even though we are living on a credit card for the past few years, and we still take home more money?” Diep said.
He questioned whether approving a new source of revenue would lead to more salary increases for public employees.
“Frankly folks, I don’t trust this council. Our contract with our current police and municipal employees are expiring – it expires on June 31,” said Diep. “If we get new money coming in, who’s to say our city employees, including myself, won’t ask for more money?”
Although the sales tax measure will go before voters, cuts are not off the table. Except for Carey, council members say they are still open to more budget cuts.
Diep tabled his proposal until a council study session on July 7. At that time, council members will discuss the cuts in detail and consider the recommendations of the financial task force.
The council also passed a continuing resolution – with Diep as the only no vote – to delay approval of next year’s budget, but allow for the city’s bills to be paid in the meantime.
“Darn it, we’ve got to do something,” Rice said. “I lived here when [Westminster] was under the county, and it’s pathetic not to have any services and have to depend on a county government.”
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