Petaluma officials are pressing for increases in sales tax and hotel taxes this year, mainly to pay for public safety and ease the city’s pension burden, City Manager John Brown said.
Any new tax measure would need approval from voters, and the city has launched polling to determine the size of the tax increases and the timing of the ballot. The new revenue is needed to offset increasingly dire budget projections, Brown said. Revised forecasts show the city going into the red in three years, with a $6 million deficit projected in 2022.
“Petaluma will need to find a way to manage through this crisis,” Brown said. “This is another recession coming. We don’t have the ability to absorb this this time. The city needs a new revenue source.”
Brown’s comments came Friday during his annual State of the City speech, which this year took a less optimistic tone than in past years. Brown, who has been with the city for the past decade and led Petaluma through the economic downturn, noted that staff has been cut by 12 percent in the past 10 years and the budget has contracted by $4.2 million, despite adding 3,000 new residents.
“We get a tremendous amount done with the resources we have at our disposal,” he said. “We’ve managed to keep our head above water. Our budget has been slashed but we’ve continued to maintain services.”
Petaluma has pursued a sales tax increase in the past. In 2016, the city studied a sales tax dedicated to street repairs, but polling showed it would not reach the two-thirds needed to pass and it never made it on the ballot. A 2014 measure that would have raised the sales tax by 1 cent for street repairs received 43 percent support at the poll, far short of the simple majority needed to pass a general tax.
With new state and county revenue to repair roads expected this year, Petaluma can turn its attention to another pressing problem, Brown said, adding back some of the 17 public safety positions cut during the recession and addressing the city’s huge pension obligation.
Mayor David Glass said he would support a general sales tax increase, because he said it would be guaranteed to go toward the city’s contractually obligated pensions. He said he was against Measure Q, the failed 2014 sales tax proposal, because he said it would not have gone toward street repairs but rather to pay down the pension liability.
“The last time, we weren’t telling people where the money was going to go,” he said. “Now we’re being honest with the public. This is the most important issue facing this town.”
Brown said the city has exhausted all of the pension reform options available, including asking employees to pay their share into the benefit pool and offering newer employees a lower tier pension plan. He said the city’s obligation to the state Public Employee Retirement System, or PERS, is the reason for the city’s current budget crisis.
“In the main, it’s the PERS rates that is driving this,” he said.
On Monday, the city council voted to take a $6.7 million loan from water and wastewater fund to pay down a portion of the city’s pension liability.
Public safety workers make up a large percentage of city employees and carry a bulk of the pension liability. Glass said that, in the wake of the October wildfires and the goodwill expressed toward police officers and firefighters, it is important to make good on those obligations.