Council hopes to adopt 6-tier biz tax model
If approved by voters, first year will be at half-off rates
The contentious debate over which business tax model to adopt for the June ballot ended with compromise on Feb. 24.
The Solana Beach City Council unanimously decided to propose to voters a six-tier model with lower rates and a 50 percent discount for at least the first year.
City Manager David Ott said he has already cut
$1 million from the city’s budget and is facing the prospect of having to reduce services for residents and businesses. With city staff reporting that sales-tax revenue has “plummeted” roughly $600,000 from two years ago, Solana Beach is turning to its businesses to help make up for the deficit. In total, the city’s major revenue streams are down $1.2 million from two fiscal years ago.
“It is a very serious time for this community and I think all of us want to do what we think is fair, what we think is balanced, what we think is in the best interest of the entire community,” said Councilman Dave Roberts, adding he was in favor of a phasing, or first-year discounted approach, to the tax. “That could be one way to make this more palatable.”
Solana Beach is one of three cities in San Diego County that does not already impose this kind of tax.
Ott said that when consumers do decide to spend discretionary money in this recession, they now often buy online. Solana Beach then gets no sales-tax revenue from these purchases, and he said it is unlikely that this habit will be changing anytime soon.
The two originally proposed versions of the tax were projected to gross between $510,000 and $540,000. The adopted model, introduced by Ott at the Feb. 24 meeting, is estimated to eventually generate just over $500,000. In the first year, though, it would be roughly $250,000 if passed.
“Certainly it’s not going to cover the entire revenue shortfall, but council has been clear over the past year as this has been discussed that this initiative was never intended to cover the entire revenue shortfall,” Ott said.
While some business owners who spoke said they understood they had an obligation to contribute since there are no big-box retail or car dealerships in the area, others said the city should look further into decreasing spending.
“I don’t know of one city that has a business tax that doesn’t have a financial problem, and just to say it’s going to help solve our problem is not the answer,” said Carl Turnbull, a commercial real estate agent.
If passed on the June ballot, business owners would have until Oct. 15 to pay their share. This will cost anywhere from $25 to $875, based on 2009 gross receipts.
The council will have the ability to continue to enforce it only at half price as long as it chooses. The legislators can decide this on a year-to-year basis.
Controversy broke out at the Feb. 10 meeting when a debate ensued over whether to add a sixth tier for the city’s highest-grossing businesses. A proposed five-tier model with no half-off phase-in approach had been on the brink of approval.
A divided council decided to come back at the Feb. 24 meeting to reconsider which model was best to adopt. It had until the March 10 meeting to approve something for the June ballot.
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