Solana Beach considers new business tax

SOLANA BEACH — Solana Beach residents may soon be casting ballots once again. City Council will discuss at the May 27 meeting the possibility of implementing a business tax as a means to increase revenue and balance its budget.
The tax, which requires a majority vote to pass, is one of five revenue enhancement options presented earlier this year. A sales tax increase and utility tax were almost immediately rejected.
Council members discussed a decrease in the minimum night stay for short-term vacation rentals, but the idea was dropped after it failed to gain support from the Condominium Organization of South Sierra Avenue.
Serious consideration was given to doubling the fire benefit fee, which would add $460,000 to the budget. The average homeowner currently pays $50. The fee, which funds fire protection services, has no cost inflation escalator. So it has gone from funding 25 percent of the Fire Department budget in 1999 to 14 percent today. Passage by a two-thirds vote would be required.
Not wanting to hit residents with two increases at once, which could result in the failure of both, council opted for the business tax, which 13 of the 18 jurisdictions in the county currently have in place. Encinitas is the only other city in the North County coastal area without one.
Councilman Tom Campbell, a certified public accountant within the city, said he was initially ambivalent about the tax.
“As a small-business owner in Solana Beach … when this first came about I wasn’t sure how I was going to feel,” he said. “After having thought about it for a while and looking at the issues, I would have no problem paying a business tax, but it has to be based on something that is equitable.”
At the May 13 meeting, City Manager David Ott presented several variations of different models used by other cities to calculate the tax. Seven base it on gross receipts, while five go by number of employees. Carlsbad uses a combination of the two.
Campbell said the total tax paid must be within reason so it doesn’t severely impact businesses — especially in the current economy — or force owners to pass the amount onto customers.
“I do not want our business community to bear the burden of coming up with $1 million because that’s what we think we’re going to be short,” Campbell said. His colleagues agreed.
“We’re not going to balance our budget on the backs of our business people,” Councilman Joe Kellejian said. “We don’t want to put anybody out of business.”
“Nobody wants their taxes raised, yet the community wants the quality of our services maintained,” Councilman Dave Roberts said. “Yet we have to cut expenses because our revenue is down. So we’ve got to figure out something we can do here.”
Roberts asked for creation of an educational campaign so the public “has the facts about what this is and what this isn’t,” he said. “I think that people will pay a reasonable, fair amount to keep this city at the level of quality that we’re at.”
In addition to seeking new revenue sources, the city is also considering cutting expenses by limiting services and scaling back some projects to balance the budget.
Ott said he will use council input to create a scaled-down version of the models he presented. Council will continue the discussion based on those models at the May 27 meeting. Residents and business owners who would like to provide input are encouraged to attend.
If the community supports the tax, mail ballots will be sent out this summer. Residents will have about a month to return them by the Aug. 25 deadline.

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