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HomeMy WebLinkAboutItem 5b. Support Legislative Advocacy for a Sales Tax Rate Cap Exemption (SLOCOG Initiative) Item 5b Department: Administration Cost Center: 1001 For Agenda of: 1/21/2025 Placement: Consent Estimated Time: N/A FROM: Greg Hermann, Deputy City Manager Prepared By: Natalie Harnett, Policy and Project Manager SUBJECT: CITY OF SAN LUIS OBISPO SUPPORT FOR SLOCOG’S PURSUIT OF SPECIAL STATE LEGISLATION TO WAIVE THE 2% BRADLEY-BURNS SALES TAX CAP FOR A REGIONAL SALES TAX MEASURE FOR TRANSPORTATION RECOMMENDATION Approve advocacy on behalf of the City of San Luis Obispo (City) to support legislation that would provide an exemption from the current Bradley-Burns two percent local sales tax cap for the San Luis Obispo Council of Governments (SLOCOG) to pursue a regional sales tax measure for transportation, subject to voter approval. POLICY CONTEXT The City Council adopts an annual Legislative Platform outlining the legislative matters on which the Council authorizes the Mayor, City Manager, and City Attorney to engage in advocacy on behalf of the City without requiring additional Council approval. However, the Council may also approve advocacy for emerging issues or situations not explicitly addressed in the Legislative Platform as needed. While support for the legislation sought by SLOCOG aligns with the City’s adopted priorities and advocacy themes, there is no specific provision in the Legislative Platform advocating for an increase in the local sales tax cap. Therefore, staff recommends that the Council explicitly approve this advocacy effort to ensure clarity on the City’s position. DISCUSSION Background As state and federal transportation funding continues to decline, SLOCOG is seeking support from local jurisdictions to pursue special state legislation. This legislation, if proposed and approved, would grant an exemption to the 2% Bradley-Burns sales tax cap, enabling a future transportation measure to be placed on the ballot for voter consideration that would not impact other local jurisdictions’ abilities to seek sales tax increases up to the 2% cap, should any local jurisdiction desire to seek voter approval for such an increase. Page 7 of 486 Item 5b SLOCOG is exploring a ½-cent countywide transportation investment measure for the November 2026 ballot. However, potential competing non-transportation tax measures proposed by jurisdictions in San Luis Obispo County may theoretically exhaust the available capacity under the 2% local sales tax cap. Enacting this legislation would ensure that SLOCOG could pursue a sales tax to address transportation infrastructure, safety, and mobility needs in the county without jeopardizing any other local jurisdictions’ future need to seek a sales tax increase. Sales tax levels in California range from 7.25% to 10.75%. With 7.25% as the statewide base rate, local jurisdictions can increase this by up to 2% with voter approval. Special legislation is required to exceed this 2% cap. Currently, five jurisdictions in San Luis Obispo County, including the City of San Luis Obispo, have voter-approved sales taxes of 8.75%, leaving only 0.5% available under the cap. A proposed SLOCOG transportation measure could face obstacles from competing measures initiated by cities, the county, other regional entities, or citizens. If one jurisdiction’s sales tax reaches 9.25%, no further regionwide sales tax measures could be pursued without special legislation. Under current law, SLOCOG could propose a transportation -related sales tax measure within the existing 2% cap. A citizens’ initiative could also be proposed for a range of purposes, requiring a simple majority (50%+1) to pass. The proposed legislation that SLOCOG is seeking would provide an exemption from the 2% cap, allowing a transportation measure—whether proposed by SLOCOG or a citizens’ initiative—to be placed on the ballot for voter consideration. This exemption would empower voters to decide whether to raise revenues to address transportation safety, maintenance, mobility, and infrastructure needs. Importantly, this effort does not impose or approve a t ax nor alter the process for tax approval. Instead, it creates an opportunity for a transportation measure to be developed and presented to voters, either by ordinance or by qualified voter initiative. Over the past decade, several counties—including Alameda, Contra Costa, Humboldt, Los Angeles, Monterey, Riverside, San Mateo, Santa Cruz, and Ventura —have successfully pursued legislation to waive the 2% cap. Numerous cities have also obtained similar exemptions. (See CA Revenue & Taxation Code §§7280-7300.4) As of 2024, nearly 100 of California’s 500+ jurisdictions have sales tax rates exceeding 9.25%. This proposed legislation would align San Luis Obispo County with other regions that have addressed similar challenges, ensuring the county’s ability to fund essential transportation improvements for its communities. Legislative Advocacy Supporting SLOCOG’s pursuit of special state legislation aligns with the City’s overarching goals and community-identified priorities, including ensuring fiscal responsibility and sustainability, and enhancing convenient and equitable alternative and sustainable transportation. This initiative also complements the City’s local revenue measure priorities, which include funding for street maintenance and transportation improvements. Page 8 of 486 Item 5b If voters approve an increased transportation tax in the future, the City would gain additional funding to help maintain and upgrade local streets and roadways. Through the development of an expenditure plan, as outlined by SLOCOG, the City can ensure that funds are directed toward projects aligned with local priorities and needs. The City’s 2024 Legislative Platform contains multiple planks that provide support for this action: County/Regional Priorities Plank 6 - Support the San Luis Obispo Council of Governments' legislative advocacy activities, where consistent with the City's adopted policies, platform, and public policy and project objectives. Transportation Plank 2 – Support the continuation of, and increased funding sources for street maintenance projects, transportation improvements, transit operations and multimodal facility projects. Transportation Plank 1 – Support changes in gas tax laws that allow local tax for transportation purposes based on a majority vote of the public, as well as revenue replacement for electric vehicles to support transportation infrastructure Staff recommends submitting a letter of support for this legislation to Senator Laird (Attachment A) and including a new legislative plank in the 2025 Legislative Platform to specifically advocate for similar matters in the future. Public Engagement Notice of this agenda item was provided through the meeting's posted agenda. The public may submit comments in writing before the meeting or share their input during the public comment portion of the meeting. ENVIRONMENTAL REVIEW The California Environmental Quality Act (CEQA) does not apply to the recommended action in this report because the action does not constitute a “Pro ject” under CEQA guidelines Section 15378. FISCAL IMPACT Budgeted: No Budget Year: 2024-25 Funding Identified: No Page 9 of 486 Item 5b Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund N/A N/A N/A N/A State Federal Fees Other: Total N/A N/A N/A N/A This recommendation does not have any fiscal impact at this time. If the legislation is approved and a measure is added to a future ballot and passed, the City would receive a portion of the revenue generated by the tax. This revenue would be used to support essential transportation projects within the City. ALTERNATIVES 1. Modify the City’s advocacy for this legislation. The Council should provide specific direction on any modifications to the City’s position on this effort. 2. Do not approve of the City’s advocacy for this legislation. Should the proposed legislation facilitate a SLOCOG measure being placed on a future ballot, the additional tax revenue would benefit City residents and visitors and align would with the community’s priorities as adopted by the Council. It is also important to note that advocating for this legislation does not imply that the City is taking a position on a future measure, which would require voter approval. ATTACHMENTS A – City of San Luis Obispo Draft Letter of Support – SLOCOG Legislation Page 10 of 486 City of San Luis Obispo, Office of the City Council, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7114, slocity.org The Honorable John Laird Senator, 17th District 1021 O Street, Suite 8720 Sacramento, California 95814 RE: Bradley-Burns Local Sales Tax Exemption- San Luis Obispo Countywide Local Transportation Sales Tax Dear Senator Laird: On behalf the City of San Luis Obispo (City), I write in support of San Luis Obispo Council of Governments’ (SLOCOG) pursuit of special state legislation to waive the 2% Bradley-Burns sales tax cap for a regional sales tax measure for transportation, subject to voter approval. SLOCOG is considering a ½ cent countywide transportation investment measure for the November 2026 ballot. However, with other non-transportation tax measures that may be proposed by San Luis Obispo County jurisdictions, there may not be sufficient capacity under the countywide 2% local option sales tax cap. The enactment of this legislation would ensure that SLOCOG, the County of San Luis Obispo (County), and all seven cities would be able to engage in a public process to develop an expenditure plan for voters' consideration. This is an opportunity for San Luis Obispo residents to consider resources to improve its transportation infrastructure, including safety and mobility needs. Additionally, the City supports language in the legislation that would enable a qualified voter initiative that would generate at least a ½ cent for countywide transportation purposes to also be exempt from the 2% Bradley-Burns local sales tax cap. The qualification of such an initiative would occur under an independent process currently provided by the Constitution. Neither SLOCOG nor any public entity would be involved in signature-gathering efforts nor messaging for such a campaign, and the County would serve as the custodian of placing the measure on the ballot. The proposed legislation will enable SLOCOG, the County, and the cities to maximize public participation in considering a potential sales tax increase for regional transportation purposes and in developing an expenditure plan that best meets the specific needs of our jurisdictions. For these reasons, the City supports a local sales tax exemption that will enable SLOCOG to pursue a countywide transportation measure and to utilize a process that will foster greater public input. Thank you for your consideration. Sincerely, Erica A. Stewart Mayor, City of San Luis Obispo Page 11 of 486 Page 12 of 486