ESCONDIDO — As the city works to address its ongoing structural budget deficit, a community survey will ask residents their thoughts on implementing a cannabis program and other possible tax ventures to increase city revenue.
The Escondido City Council held its second vision workshop to determine goals for the city on Sept. 27. At the meeting, the council revised its four strategic goals to include eliminating the structural deficit as its top goal, followed by improving public safety, increasing retention and attraction of residents, businesses and visitors alike, and encouraging housing development.
The council will also direct staff to send out a community survey asking residents what they think about implementing a taxed cannabis program, a transient occupancy tax and a parcel tax that would focus on establishing a library district in the city to generate additional revenue.
The city expects a $10 million average operating budget deficit over the next five years and an $18 million average deficit over the next 20 years.
Earlier this year, after closing a $11.3 million budget shortfall, staff warned the council that “deep cuts” would need to happen if additional revenue isn’t found. The city’s $59.6 million reserve funds will be gone by 2030 if nothing changes.
The community survey will not ask residents about another sales tax measure.
Escondido voters rejected a ¾-cent sales tax measure on the November ballot last year. Had it passed, the city would have generated approximately $21 million annually – at least half of which would have been used to support police and fire services, maintain infrastructure, parks and buildings and address homelessness.
According to staff, a parcel tax could generate as much as $28 million for the city annually. Based on numbers from Oceanside and Vista, staff anticipate anywhere between $24,000 and $4.5 million from a cannabis tax and about $1 million from a transient occupancy tax.
A parcel tax is a form of property tax set at a rate based on parcels – a unit of property – rather than the value of a property, which is the standard method of levying property taxes. The tax could be used for all municipal services or specific services like a library district, parks and recreation district or public safety district. In the city’s case, the parcel tax would focus on the library option.
Another option for the city would be to open itself up to cannabis businesses in some form and establish a cannabis business tax. Escondido is one of nine San Diego County cities that still do not allow any cannabis business – whether for retail storefront or delivery, testing, manufacturing, distribution or cultivation.
Staff compared potential earnings to cities like Vista, which has 11 dispensaries and receives approximately $4.5 million annually through its cannabis business tax program.
While the city is open to exploring the cannabis option, Councilmember Mike Morasco reiterated his hardline opposition to regulating cannabis.
“I hope there’s at least three of you who will vote for it because I’ll always vote no,” Morasco told the rest of the council at the workshop.
A transient occupancy tax, or hotel tax, would charge visitors a fixed fee on stays 30 days or less in hotels, inns, motels and other lodging rooms within the city. While the city does not regulate short-term rentals, a program is currently in the works and could result in a TOT on vacation rentals.
A TOT and cannabis business tax would only require a majority of ballots cast to support all municipal services – if used for a specific service, like a library district, they would require two-thirds approval. A parcel tax would require two-thirds approval for all municipal or special service options.
“The next steps will include exploring the above and working with respective Council Subcommittees regarding budgetary and economic development related items,” said City Clerk Zack Beck via email.
To save money, the city is also looking to stop providing certain services, including parks and recreation, youth, senior and family programming, and instead shift those responsibilities to outside entities that would fund and manage them. City Manager Sean McGlynn referred to these as “beautiful exits.”
Staff will return in front of the City Council on Oct. 11 with a general fund financial report, followed by a fee study and full cost recovery model in January.
