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San Diego to do the unthinkable: seek a tax hike

Plagued by pension-related budget woes, the council is turning to voters in the notoriously tax-averse city to approve a half-cent-on-the-dollar sales tax hike for a sorely needed revenue boost.

August 04, 2010|By Tony Perry, Los Angeles Times

Reporting from San Diego

The San Diego City Council voted Wednesday to do what it has steadfastly avoided since the city's pension-beset budget problems arose nearly a decade ago: ask voters to approve a tax increase.

The council voted 6 to 2 to place a complex measure on the November ballot for a half-cent-on-the-dollar boost in the city's sales tax. Mayor Jerry Sanders, who had ruled out an increase, eventually signed on to a plan cobbled together by his opponent in the 2005 election, Councilwoman Donna Frye.

Even if approved by a majority of voters — hardly a sure thing — the 9.25% sales tax would still be below that of Los Angeles, Long Beach, Oakland and San Francisco but equal to that of San Jose.

San Diego would retain its distinction of being one of the few large cities in the country that does not charge for trash pickup or have a utility tax. And other kinds of taxes common in cities are either nonexistent here or set at a much lower rate.

Opposition to taxation is so strong in San Diego, and career-conscious politicians so reluctant to challenge it, that the half-cent boost would go into effect only if certain conditions are met: a vigorous out-sourcing plan instituted, a lower pension plan for new firefighters approved, and city employees agreeing to further reductions in pensions and health benefits.

The sloganeering has already begun. Proponents call the measure "reform before revenue." Opponents, including two council members, a taxpayers association, the Republican Party and business groups, label it "dash for cash" and a "pension tax," and promise to campaign against it.

The editorial page of the San Diego Union-Tribune, the loudest and most persistent of the civic voices in favor of pension reductions, hinted before the vote that it would oppose the tax increase if the council and unions do not immediately start cutting pensions and health benefits and laying off city employees in favor of cheaper workers from the private sector.

Under the measure, the half-cent sales tax boost would last for five years.

The language of the measure suggests that the hike is necessary to avoid layoffs of police officers and firefighters and to maintain the city's street resurfacing program. The city only recently began filling potholes after several years when it could not afford to resurface streets.

Like many city governments, including Los Angeles, San Diego has a growing deficit in its pension fund. In decisions now roundly condemned, the council approved pension increases a decade ago that it believed would be covered by a rising stock market. When that didn't pan out, the city was left to pay a tab that increases each year.

In 1991, the average retiree received slightly more than $11,000 a year, along with health benefits. The amount is now more than $33,000, also with health benefits. Without a reduction in expenses or an increase in revenue, the city's required payment to the pension fund is expected to consume one-quarter of the general fund by 2015 and one-half by 2025, requiring large cutbacks in city services.

To balance the city's budget, the mayor and council have implemented a variety of small service cutbacks, salary freezes and layoffs. A lower-paying pension plan has been adopted for new employees.

tony.perry@latimes.com

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