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Donna Frye Discusses Sales Tax/Reform Proposal

Audio

Aired 7/29/10

Why did Donna Frye vote against putting a sales tax increase proposal on the November ballot? We speak to Councilmember Frye about the reform measures that she would like to package with the tax increase.

MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. The San Diego City Council on Monday voted down a measure to put a half-cent sales tax increase on the ballot this November. That could have been the end of the story. As it turns out, that vote, and the whole city council debate that preceded it, were part of a much larger story about San Diego's dire economic situation and how to go about fixing it. City Councilmember Donna Frye surprised a lot of people by joining the majority to vote no on the sales tax increase Monday. But now she's been engaged in meetings and negotiations to bring back the issue to the city council next week. Joining us to explain what’s going on is San Diego City Councilmember Donna Frye. Good morning, Donna.

DONNA FRYE (Member, San Diego City Council): Good morning. How are you?

CAVANAUGH: I’m doing fine. Thank you for taking the time do this.

FRYE: Of course.

CAVANAUGH: Now, let’s rewind back to Monday’s city council meeting.

FRYE: Okay.

CAVANAUGH: Why did you vote against putting the city sales tax proposal on the ballot?

FRYE: Well, I – I don’t think it should be any surprise to anyone. When we heard this matter at Rules, I think it was the week prior, I had said that I would support moving it to the full council with no recommendation but that there needed to be some reform links added to it. So when it was my turn to speak, I did not support simply putting a sales tax increase on the ballot without linking it with some type of reform measures. And I’ll go back a little bit. One of the things that I’ve watched happening in our city is that there are people who say we have to reform and cut and then there are people who say we need to increase taxes or increase revenues. And I think that both sides are right. The problem is, is no one wants to jump first.

CAVANAUGH: Right.

FRYE: And it was my thinking that it would be a good idea if everybody kind of jumped together because we have made a lot of cuts already and we have made a lot of citywide reforms. The problem is, is that the city also needs an infusion of revenue.

CAVANAUGH: So, if I may, what are some of the reforms that you would like to see linked in a way with the proposal to raise the city sales tax?

FRYE: Well, one of them that I think is probably very, very important is to eliminate some of the pension benefits and reduce those benefits. For example, with retiree health, we really need to reform the current retiree health system that we have to make sure that people are provided with some level of retiree healthcare but that it is not so expensive. It’s much too expensive and it’s not sustainable. So we need to reform that. We need to really look at the cost neutrality study that should be completed soon, I hope, and make a determination on whether the DROP benefits are actually cost neutral as required by the City’s municipal code. We need to look at managed competition and competitively bidding out more services and link those competitions and the implementation of the managed competition to a trigger that would not allow the tax to move forward if certain of these conditions were not met.

CAVANAUGH: Now, it is – Let’s go back to the idea about changing the pension…

FRYE: Yes. Yes.

CAVANAUGH: …the City’s pension and linking that to a possible sales tax increase proposal on the ballot in November.

FRYE: Right.

CAVANAUGH: What are the legalities involved in that? Wouldn’t you have to get approval by the union? And does that make it even possible to put something like that on the ballot?

FRYE: I believe it’s possible and what this does is it doesn’t say that it must happen, it doesn’t presuppose that it will happen, but what it says is, is that we will have that conversation as part of Meet and Confer. And if it does not happen, then neither does the tax.

CAVANAUGH: Many journalists in town and people watching the meeting on Monday, the city council meeting on Monday, were really surprised that the council was having a frank, a public discussion about the City’s long term debt.

FRYE: No kidding.

CAVANAUGH: And I’m wondering what your reaction to that is.

FRYE: It’s long overdue. It’s a discussion I’ve been trying to have for many, many years. I think one of the things that pushed this to where it did become a much more public discussion is that the City has run out of options. And very, very soon, we will find ourselves in the next budget cycle where we’re facing $70-, $80-million deficits and probably higher than that and that if people don’t soon start talking—not at each other but with one another—that it’s only going to continue on as it has for the past many years and there will be no solution.

CAVANAUGH: Now many of the people who spoke at that meeting on Monday were very much against a tax increase. That’s been a feeling of a lot of people when you talk about any kind of revenue enhancement…

FRYE: Yeah.

CAVANAUGH: …in San Diego. Now, if you do get the half-cent tax – sales tax increase proposal on the ballot, it will also be on a ballot with a proposed city hall and probably a parcel tax for San Diego…

FRYE: That’s true.

CAVANAUGH: …Unified. So what kind of climate is that to introduce a new tax for San Diego?

FRYE: It could be a deadly combination. There – This is – This is not for the faint of heart but I will tell you something, that if we don’t do something and we don’t take some action and we don’t do it now, that people can expect things really not to change and certainly not change in a hurry. Two of my colleagues have made a proposal to start another study group. It would be – It was my belief that we’ve studied this to death. We all know what the problems are and we all know what the solutions are. The question is, is are we going to continue the debate, revenues versus reforms, or are we going to look at this and say to ourselves, you know what, we have an opportunity. It may or may not work but it certainly will not work unless we all come together and try. And that’s really the point we’re at in the city, in my opinion. You know, I’m really – Part of this, too, is to bring both sides together and to – You know, it’s like two little kids. I’ve kind of compare – You have two kids and they’re standing at a lake. And the one kid says, well, you go in first. And the other kid said, no, you go in first. And, really, at the end of the day, the best way to get them to go in the water is if they hold hands and jump in at the same time. And that’s really where we’re at right now.

CAVANAUGH: I want to ask you where you’re at right now. By the way, I want to tell our listeners, I’m speaking with San Diego City Councilmember Donna Frye. I said in my introduction that since the sales tax increase proposal was voted down on Monday…

FRYE: Umm-hmm.

CAVANAUGH: …that there have been meetings and negotiations going on to try to put together, as you’ve been outlining, some sort of sales tax increase with some reform measures on…

FRYE: Right.

CAVANAUGH: …one ballot proposition.

FRYE: Correct.

CAVANAUGH: How are those meetings going?

FRYE: Well, I have – I had an interesting meeting. I was, in fact, the very day that we put this memo out, that my office put this memo out, which is, just so people are clear, it’s a starting point. This is the beginning of the discussion, the way to get public discussion about it and to have something for people to love or to hate but to at least offer their suggestions. And that same day, I was getting ready to leave here and I had folks in the lobby from the Chamber of Commerce that wanted to talk and encourage this type of discussion and these types of ongoing, you know, thought processes that would link the reform with the revenue. And I also have spoken with some of the representatives from the labor organizations. They are very willing to cooperate and they understand they need to make concessions. So my hope, and maybe I’m overly optimistic, which is possible, but my hope is that the business community, who certainly understands the city’s financial issues and understands the problems that could be associated with trying to go out to the bond market without having, you know, a good stable, financial situation here in the city, and then labor who also understands that there are going to be concessions made, and then the public. If we can get both sides to embrace this idea and go out and talk to the members of the public and explain this to them and be helpful and try and make it work, I think that we can actually see a change.

CAVANAUGH: Do you, though, Donna, think that this is perhaps a little late in the day to try to get this conversation going?

FRYE: No. No, this conversation has been going on for the last five years. This was essentially the same conversation I tried to begin and continue since 2005 when I originally ran for mayor, which was a very similar plan, which said I would not consider raising taxes until we had a more comprehensive package to deal with the structural deficit, the pension issues, and that you needed to come together, put it into a more comprehensive package, and ask the voters. And then you had to make sure that there was a way to – to make sure that there were certain things that had to be done before the revenues would be collected and this locks that up. So, no, this discussion has been going on for a very long time and I think it’s the perfect moment because we have a date that is looming.

CAVANAUGH: Yeah, that’s what I meant…

FRYE: Yeah.

CAVANAUGH: …with the deadline. The deadline to get this on the ballot…

FRYE: August sixth.

CAVANAUGH: And you have a special session, two special…

FRYE: On Monday.

CAVANAUGH: On Monday and…

FRYE: Which I was hoping it would be sooner but apparently that’s not going to happen. I’m going to try and keep pushing but, yeah, I think that everybody knows what the problems are and I think that everybody knows what the types of solutions there are and the ones that are available.

CAVANAUGH: What do you see for next Monday’s meeting, Donna? Do you see another kind of a frank, public discussion about the City’s economic situation?

FRYE: Absolutely, and I’m so glad to finally see that happening. I was a bit disappointed when Council President Hueso had asked me what did I want and I started to tell him and then that sort of got cut off. So I hope this is the beginning of a more open, frank discussion, things that people whisper about or talk about, you know, not in polite society, I guess. But we all know it’s there. You know, it’s sort of like the emperor’s new clothes, you know, everybody knows what’s going on. There’s no secrets anymore. This is reality and it needs to be discussed in that framework.

CAVANAUGH: This is a very complex – getting a half-cent sales tax increase on the ballot, getting that approved, it would seem to many to be difficult enough but, I mean, if you’re going to put – also link reforms that have to be explained…

FRYE: Yeah.

CAVANAUGH: …to the public and have to be explained to voters, etcetera, etcetera, how do you see an entire package like this being digested by the voting public?

FRYE: We have to do a good job of getting out and speaking to the public. But I think that the overall message is a very simple message and that is that we have problems, there are solutions that are available, we need to link up the reform with the revenue and there has to be a coming together instead of a tearing apart because what this city has gone through for the past many years is a series of blame, blame games. It’s time to stop that. It’s time to say we need to look at a solution and work to make it happen, not try and figure out ways to trap block people to make sure it doesn’t work, and to continue this – this really, at this point, not helpful discussion that’s going on.

CAVANAUGH: My last question to you…

FRYE: Yeah.

CAVANAUGH: …Donna, is how hands-on is the mayor’s office in trying to draft this compromise reform package?

FRYE: I have spoken with some of the mayor’s staff and plan to meet with them again. What I see happening is a public document that is out there for everyone to see, for everyone to look at and for everybody to, you know, take their shots at it, you know, incorporate their comments, get their ideas out there, and that includes the mayor’s office. This – My goal was to do a couple of things. Number one was to link the revenue with reform. Number two was to have a very public, open dialogue that will occur over the many days. And probably the most important is to get the business and labor community and come to a more moderate solution rather than having the very far sort of more strident voices continue to drive this discussion.

CAVANAUGH: Well, thank you for your time. I’ve been speaking…

FRYE: Thank you.

CAVANAUGH: …with San Diego City Councilmember Donna Frye and we will see what happens on Monday. We’ll look forward to it. Thanks again. You’ve been listening to KPBS.org, and if you would like – if you would like to comment, please go online to KPBS.org/thesedays. Coming up, the pros and cons of Prop 19 which would legalize marijuana, that’s as These Days continues here on KPBS.

Comments

Avatar for user 'bdruken'

bdruken | July 29, 2010 at 9:25 a.m. ― 4 years, 5 months ago

This conversation about how to meet San Diego's budget deficits make me think about the Coronado Bridge, or as Wikipedia says, the San Diego-Coronado Bridge completed in 1969:

Although the original bond was paid for in 1986, the toll stayed open until 2002 where it was the last toll bridge in CA to discontinue tolls. What about reinstating the toll? On wikipedia it says, "Though tolls are no longer collected, beginning February 19, 2009 there was talk of resuming westbound toll collection."

What do others think?

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Avatar for user 'melshap'

melshap | July 29, 2010 at 9:28 a.m. ― 4 years, 5 months ago

If Frye's proposals are ignored, the City wll still collect the additional sales tax for 2 years.

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Avatar for user 'melshap'

melshap | July 29, 2010 at 9:40 a.m. ― 4 years, 5 months ago

Since the council is unable to understand simple arithmetic, they have ignored a tax that can raise as much as the sales tax and impact very few people.
it is the Property Transfer Tax,where we charge sellers of real estate 55 cents per $1000 of sales price. According to the Independent Budget Analyst (IBA), the City collected $5 million last year.
By comparison, Oakland charges $15 per $1000 (IBA report). if we charged the same rate as Oakland ,we would collect $135 million,which is more than forecast for the sales tax.

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Avatar for user 'Frankie'

Frankie | July 29, 2010 at 11:42 p.m. ― 4 years, 4 months ago

Melshap --

I can't do the math either.

Does an Oakland-style real estate transfer tax mean that a little old lady who wants to downsize out of her too-big family domicile in like, La Jolla, would have to PAY OUT $18,000 when she sold her $1,200,000 house? That's a lot of dough, but it just gouges the pretty-rich. In contrast, the sales tax is regressive and affects everybody, most especially the poor.

Your idea is fascinating. If San Diego's real estate transfer tax has been 55 cents per $1000 in sales price, I guess that's one explanation for the building, buying and selling boom that's gone on in this town up to now. It's been a bargain for developers.

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