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Pleasanton residents will be voting on a city revenue measure this November that, if passed by a simple majority, will increase the city’s sales tax by half a percent and bring in roughly $10 million annually for the following 10 years.
The Pleasanton City Council voted 4-1, with Councilmember Jack Balch dissenting, in favor of placing the tax increase measure on this year’s ballot during Tuesday’s meeting, the culmination of nearly nine months of looking for ways to tackle a structural budget deficit that — if not addressed soon — could force the council to make drastic cuts and reductions to city services and amenities.
“When that ballot comes to my door, I’m going to support it and I hope you will too,” Mayor Karla Brown said during the July 16 meeting. “This is what we need to keep Pleasanton a highly sought after and desirable community.”
If approved by voters following the Nov. 5 election, the total sales tax in Pleasanton would go from 10.25% to 10.75%, which means that for every $100 of taxable purchases, consumers would pay 50 cents in additional tax.
The proposed tax — which would sunset in 10 years — would be paid by all consumers purchasing goods in the city and the revenue would remain in Pleasanton, according to staff. Prescription medicine, groceries, rent, mortgage payments, utilities and any digital goods would be exempt from the tax.
Last year, staff identified a structural deficit in the city’s budget where expenses are increasing faster than revenue, Pleasanton finance director Susan Hsieh said on Tuesday.
Hsieh said this is due to a number of reasons including slow real estate developments, a $11 million drop in hotel tax revenue since the pandemic, declining retail sales activity, increasing operational or contract service costs, rising personnel costs, unfunded mandates from the state and increasing insurance costs.
Other growing expenses that were also mentioned are the city’s infrastructure and facilities, which are aging and need to be replaced or rebuilt, and pension liability cost increases, which Vice Mayor Julie Testa pointed out as one of the main drivers for the deficit.
Testa had Hsieh point out that in 2017, the city’s pension obligations that came out of the city’s general fund was $12 million — in 2022, by comparison, the city paid about $22 million from its general fund in pension costs. Testa also noted that money was only the minimum amount due.
“When we say that our expenses are growing faster than our revenue, that’s a significant impact on our expenses, right?” Testa asked staff to which Hsieh said “yes”.
Hsieh said contract services are another key major cost for the city. But as City Manager Gerry Beaudin elaborated, contract services are cheaper than paying for employees to do jobs that aren’t needed on a regular basis.
He also said the city can’t just eliminate positions just like that in order to cut costs for various reasons, as some residents have suggested.
Because of all these factors, the city is forecasting an average budget shortfall of approximately $13 million annually over the next eight years with a total cumulative deficit of $110 million. If there is an economic downturn, the average annual deficit is projected to exceed $22 million and the cumulative deficit is projected to exceed $180 million over the next eight years.
Over the past few months, the city has taken measures to save money by merging departments; providing lower pension and retiree medical benefits to employees; limiting the number of budgeted general fund positions; and reducing costs related to contracted services or new department programs.
The council also recently approved $2.5 million in reductions from the current fiscal year’s budget, which included the deferral of capital improvement projects such as the highly contentious skatepark project at Ken Mercer Sports Park and the Century House renovation.
But even with all of that, staff said it wouldn’t be enough to cover a structural deficit.
“We are on a path to reduce costs … while we explore this revenue measure option, knowing that the alternative is going to have impacts on our community and on our employees,” Beaudin said.
This will be the first time in the city’s history that it asks the community for financial help in the form of a revenue measure. According to staff, about 1% of Pleasanton’s 10.25% sales tax actually comes back to the city’s budget — whereas the tax increase will produce revenue that will only go to the city and not anywhere else.
The proposed ballot language reads as follows: “To maintain city services and minimize cuts, such as police and fire protection; 911 emergency response; disaster preparedness; pedestrian safety; park maintenance; pothole repair and street maintenance; recreation programs; open space preservation; and other general government uses; shall the City of Pleasanton’s measure to establish a half-cent sales tax, providing approximately $10,000,000 annually for 10 years, keeping all funds local, with annual audits, public spending disclosure, and oversight, be adopted?”
The council changed the first part to say “minimize cuts” instead of “prevent” — which is what the ballot language originally said — after Beaudin said it was more accurate to say prevent because the city can’t 100% promise to prevent all cuts.
The measure, according to staff, would generate new revenue to help pay for essential services like public safety — which staff said makes up about half of the city’s general fund and also is one of the top priorities for residents, according to a recent community survey.
The council actually approved an ordinance on Tuesday, along with everything else, that would see the council form a five-member, independent citizen oversight committee to review and report the use of the revenue in order to ensure all funds are spent on services and programs consistent with community priorities.
If voters don’t approve the tax increase, the city will have to turn to its backup contingency plan, which would make significant cuts to city departments, in order to address the city’s deficit. Beaudin pointed out how staff have been working on the backup plan for a while and they are prepared to quickly shift to that plan — which he said will impact residents in visible ways.
That plan, which has not been approved, includes reduced library hours, eliminating funding for crossing guards, closing one of the fire stations in Pleasanton and reducing police programs, among other cuts in the next two-year budget cycle.
Various Livermore-Pleasanton Fire Department fire captains, Pleasanton Police Department officers and a library employee all spoke during Tuesday’s meeting to voice their support for the tax increase. The fire captains specifically said closing a fire station or reducing personnel costs would greatly affect response times and service in general and that the revenue measure is crucial if residents want the same services they currently see.
“It is a small tax on nonessential items,” Testa said. “This isn’t going to be as harsh as a parcel tax or a bond … this will help us maintain that quality of life.”
While several city employees shared their support for the tax increase, at least one Pleasanton resident, Matthew Gray, showed up on Tuesday to voice his support for the tax increase. Gray said he believes the majority of Pleasanton residents would support the measure because they understand saying no to the tax increase means saying no to city services and amenities.
“This half-cent tax measure is simply a matter of saying yes to the city, yes to financial stability, yes to tomorrow, yes to our future,” Gray said.
But for Pleasanton resident Jon Krueger, he still believed the council should have voted down the measure because he said after he looked at recent budgets from Pleasanton and other Tri-Valley cities, he found that the city spends considerably more in expenses compared to surrounding cities, which shows Pleasanton has a spending problem that it needs to get in check before it asks residents for more money.
“If I found that we’re spending less than our neighbors, I would see a case for (saying) we can’t cut (more),” Krueger said. “But that’s not what I found. We’re spending almost twice what our neighbors are … I would say there’s room for reductions.”
However, Beaudin said there’s some nuance when it comes to comparing different cities’ budgets because you have to look at what services each city provides.
Balch also had some issues with the revenue measure and decided to vote no on the measure — even though Councilmember Valerie Arkin said she wanted to get a unanimous vote. He said he would have liked to see the city be more fiscally prudent in its past budget-related decisions rather than putting the fate of the city’s services and amenities in the hands of a tax increase.
“A budget is a reflection of our values,” Balch said. “Our values should not be dependent on a single electoral vote or action this November.”
“I’ve heard significant dismay over missed opportunities to demonstrate fiscal responsibility and the need to rebuild trust with our community,” Balch added. “This is a hundred million dollar revenue action over the ten years that it will be in place — I don’t take that lightly … I just feel that a deeper community engagement and a deeper community sense of where we’re going is required.”
While staff have said the $10 million generated from the tax increase wouldn’t completely cover the $13 million annual deficit every year — Beaudin said the city will still have to expect some level of cuts or reductions — it would still make it so Pleasanton wouldn’t have to make such drastic cuts as outlined in the contingency plan, which the rest of the council wanted to avoid by supporting the tax increase.
“Cuts have been made,” Brown said. “They’re somewhat invisible to you, those were the first cuts we made so that we didn’t have to cut services. The next (cuts) are going to be painful.”
“I wish we had a better choice,” she added. “I don’t want to come to you asking for money … but I’m going to support letting the voters decide and I hope the voters are with me because I’m going to support this ballot measure when it comes to the voters.”
