While the sizzling summer weather cools down, Petaluma’s government is heating up as officials prepare to tackle a slate of critical issues this fall that will shape the city’s future.
As the seven-member body of decision makers returns from a summer hiatus, it will be tasked with crafting policies surrounding recreational marijuana, finding solutions to Petaluma’s housing crunch, advancing infrastructure projects and negotiating employee contracts. The city council also aims to identify new sources of revenue, such as taxes that are expected to land on a June 2018 ballot, to keep the budget afloat without cuts to the vital services on which residents depend.
Staring down an impending budget shortfall, spiking pension costs and millions of dollars in unmet infrastructure needs, the city council is exploring two tax measures.
“Revenue is the main thing for the city,” Mayor David Glass said. “Economic revival — there is no number two priority. That’s it. Survival is it.”
Though the measures are still taking shape, voters may be asked to approve a 2 percent increase in the city’s transient occupancy tax, which is charged for stays in hotels and short term rentals. The city is also exploring an increase in the real property transfer tax, which is levied on property and homes sold within the city.
A 2 percent increase to the transient occupancy tax would bring Petaluma’s rate to 12 percent, equal to the highest rates charged in Sonoma County. That could generate an additional $650,000 a year on top of the current $2.75 million in revenues, according to staff projections. Other hotel projects in the pipeline would increase that number.
Petaluma currently charges $2 per $1,000 of value in real property transactions, which will bring in an estimated $1.15 million in this fiscal year. Increasing that tax by $1 would add $635 to the average cost of a home sale while netting $600,000 annually for the city. A $2 bump would add $1,270 to the transaction costs while bringing in $1.2 million, according to the city’s projections.
If nothing changes, the city’s budgetary imbalance is expected to rack up to $37.1 million by fiscal year 2026. Pension costs, mostly tied to former city employees, are anticipated to increase by $1 million each year for the next decade after changes to California Public Employees’ Retirement System at the state level. The city is looking at other ways to reduce those costs, City Manager John Brown said.
At its Sept. 11 meeting, the council is expected to appoint an ad hoc committee to conduct outreach about the city’s fiscal affairs and the potential ballot measures. A town hall meeting about the taxes will likely be held before the year’s end, followed by polling and a final decision about ballot measures ahead of the June 2018 election, Brown said.
Glass said that while those two measures will provide some relief, he would like to explore a broader-reaching solution.
“What’s ideal to me is a measure that gives us the revenue to deal with the issues,” he said. “A quarter cent (general sales tax increase) for 25 years is a number that could deal with that. Increasing TOT is money we’ve left on the table for too long. I don’t have a passion either way about the real estate transfer tax. … We’ll see where it goes.”