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Mayor Won't Seek City Tax Increase

Mayor Won't Seek City Tax Increase
Despite an ever-increasing budget deficit, San Diego Mayor Jerry Sanders decided not to propose a city sales tax increase. We'll find out why.

GLORIA PENNER (Host): When we first started talking about the San Diego mayor’s office dancing out the idea of an increased city sales tax to close the budget hole, reaction was this would be a tough sell to the business community. And, guess what, reaction was right. JW August, let’s start with the idea. Where did it come from? What did it call for?

JW AUGUST (Managing Editor, KGTV 10News): Well, it seems to have come out of the back hallways of city hall but the mayor had a lot to do with it. My understanding, I talked to some people involved in the process, that they actually had labor and business leaders sitting down and talking about that. They were calling it the grand compromise where they were going to – able to create, with this tax and a series of other agreements made, they would be able to take care of the shortfalls in the budget. But, unfortunately, it never got out of the starter’s box. And it’s like the County deal, in that case, you know, we were just talking about the County and Ron Roberts and the supervisors who should’ve heard about this. In this particular case, this wasn’t to pass a tax, it was to let the public vote on a tax. It’s another example of the people that should’ve had the say on the deal didn’t get a chance. I would’ve have liked to have a chance to vote on this half-percent sales tax increase.

PENNER: How much money would it have potentially brought in?

AUGUST: Oh, well, I’ve heard different figures. I can’t tell you.

BARBARA BRY (Co-Publisher/Opinion Editor, A hundred million or so…

AUGUST: Well, yeah, quite a bit of cash.

BRY: …is the estimate and per year.

AUGUST: And it was all – it wasn’t the only thing, there was other things on the table. They were moving forward with the outsourcing and they were talking about—now, I don’t know if this has been published or not—maybe you can tell me, that, for instance, for the data corporation, the San Diego Data Corporation, they’d already found that by outsourcing the help lines for the data corporation they saved a million and a half dollars. So they said, look, outsourcing works. That should be part of this package.

PENNER: Okay, so you’re raising the issue that this should’ve been something that the voters vote on.

AUGUST: Absolutely.

PENNER: Not something that’s being decided behind, quote, closed doors.

AUGUST: No, not want-a-be mayors want to pontificate about, you know, saving our tails. Let us decide.

PENNER: Well, that is an amazing concept. And let me ask our listeners about that. Do you feel that you have missed an opportunity to vote on helping to reduce the deficit or even cover the entire deficit by increasing the city’s sales tax by, what was it?, a half a percent?

BRY: Yes.

PENNER: Half a percent. And that, you know, that doesn’t please you or it does please you. Our number is 1-888-895-5727, 895-KPBS. Is this something that should be decided by the voters? That’s the basic question. Barbara, when we come down to it, would that money have really covered the deficit in the general fund?

BRY: Yes. Apparently the structural deficit is around $73, $75 million. This, according to estimates, would’ve raised about $100 million a year so it would have covered the budget deficit. Some people say the budget deficit could be as high as $90 million but it still would’ve covered the deficit. I think what’s disheartening is—and I agree with everything JW said about, you know, the voters, in the end, should have the decision—but why is the mayor so afraid to let the voters have the say on this when he’s, you know, a lame duck mayor, he’s not apparently going to run for another office. And I just find it very, very sad. And it also looks like, you know, sort of there was a coalition of people at the table and many of whom were willing to make concessions, that Labor was willing to make concessions on outsourcing, and it just makes me very sad about the future of our city.

PENNER: Right, and it really did look as though the Labor Council’s leader, Lorena Gonzalez, she actually praised the mayor for his willingness to negotiate and there was talk about concessions. And this is like a breakthrough. But, Scott, you are shaking your head.

SCOTT LEWIS (CEO, Well, there’s a couple of things to think about. Let’s do two important pieces of background on this. One is the structural deficit that Barbara mentioned. The City is not set up to take in as much money as it’s set up to spend. And this is just…

PENNER: All right, just clarify. What’s the difference between a deficit and a structural deficit?

LEWIS: A structural deficit is a chronic deficit, something that the City is simply not set up to take in as much money as it is set up to spend. And the mayor has promised, after vacillating on whether it even existed, has promised to get rid of that difference and so that – I mean, we’re basically set up every year to be short. And so something has to change. The second piece of things you need to think about here was this, perhaps the most polarizing debate that I would – I had ever seen start to begin in San Diego was about Carl DeMaio’s ballot measure that was going to go into the November ballot. It was to outsource a ton of City services, it was to get rid of the living wage, it was to do a bunch of things that sort of restructured the City and its relationship with Labor. And it was turning, already in June, to be one of the most toxic debates I’d ever seen and that includes the entire period where City Attorney Mike Aguirre was here.


LEWIS: Okay, so that set up these discussions that were these sort of compromise discussions. Should we reject DeMaio’s proposal somehow or should the mayor come out against it in an exchange the Labor would give up some things right there. So they were talking about this. That – Those discussions somehow morphed into a discussion about a sales tax and Labor had talked about, well, if you do that, we can outsource the Miramar Landfill and we’ll agree to let some of the other cities go up for managed competition, which is basically outsourcing.

PENNER: Well, thank you for that background. That really does help. Let’s turn to our callers now. We have a lot of people who want to join us on this one. We’ll start with Steve in Rancho La Costa. Steve, you’re on with the editors.

STEVE (Caller, Rancho La Costa): Well, yes, good morning and thank you for having me on the air.

PENNER: You’re welcome. Go ahead.

STEVE: Yes, I just wanted to say as far as the situation in San Diego and all California is in along with the entire nation, the United States, with taxes and revenues to support our capitalist system is people forget and they’re listening to the propaganda by the Republican Party saying that we don’t need to raise taxes, that it’s some sort of a bad thing to do. Well, we need taxes as our tax base to keep this machine going, this capitalism. And I, for one, strongly agree that we need to raise taxes. And look at California, every time there’s a budget, you have the Republican Party standing firm and saying we’re not going to raise taxes so look what we’ve got. So I believe that taxes should be raised appropriately.

PENNER: Okay. And, you know, we are going to talk about the parcel tax in the next segment and this issue will come up again so hang in there with us and thank you very much. Steve, I appreciate that. All right, let’s take – No, I don’t think we have time for another call until after the break. So we are going to take our break and then when we come back we will take more of your calls. There’s lots to talk about on this one should, indeed, the voters have had a chance to have their say on whether the city sales tax in San Diego needed to be increased to cover our budget and to change the structural deficit. Our number is 1-888-895-5727. This is the Editors Roundtable. I’m Gloria Penner.

PENNER: This is the Editors Roundtable. I’m Gloria Penner. And we are in the middle of talking about an increase in San Diego City sales tax that didn’t happen. The mayor backed off and even though it seemed to have emerged from his office, which means that the voters won’t have a chance to vote on whether they want to increase their sales taxes to cover and actually to change the structural deficit, bring in enough revenue to cover the City’s expenses, which is the point. Now, let’s go right to the phones because we have a lot of callers who are waiting to speak to us with interesting things to tell us. We’ll start with Tina in San Diego. Tina, you’re on with the editors.

TINA (Caller, San Diego): Thank you. Yes, I’m glad this is not going to the voters for a vote because I would vote it down. I’m tired of the bad decisions that present and former councils have made that have resulted in increases such as these. I understand that most of this sales tax would go primarily to offset the pension costs. I heard this from Bob Kittle on a news, TV news, show and I just – I wondered if you have a comment regarding that side of it.


TINA: Also, we have – the taxpayers, we’re paying almost – with this increase, we’re approaching almost 10% sales tax in this state, which is getting really expensive, especially for people on limited and low income households.

PENNER: Okay, well, you’ve raised two very excellent issues and Bob Kittle, by the way, is working at KUSI now.

BRY: He sure is.

PENNER: And I understand he is on the air once a week or so as he used to be here on Editors Roundtable. So…

AUGUST: So nice to see that bowtie again.

PENNER: Well, let’s answer some of Tina’s concerns. We’ll start with the idea that she said Bob Kittle raised, that this sale tax could go to pay for the pension costs for City workers. Scott?

LEWIS: There’s no question. The benefit enhancements that were made in ’96 and 2002, we are now facing the consequences of that. We used to not have to put this much money into the pension system and now we have to pay hundreds of millions of dollars into it. That is the reason that we have a chronic budget deficit and that’s why we’re struggling to make ends meet. The question comes now back to, okay, well, how do we close that gap? We’ve tried to attack those benefits. Maybe we can attack them more. But that, you know, if we don’t do something about this structural deficit, the City services are going to continue to decline. So we can – What I’ve always said, we need to have a comprehensive package. You need to have as much of the reforms on the pensions and such as you can, on the managed competition, and then those reforms are made more attractive if you show Labor that you’re sincere about potential revenue increase. Now one quick point, we left the discussion about Lorena Gonzalez and labor leaders having been open to some sort of compromise. The fact is, is that they – that their – they influence the majority of the city council quite a bit. They, you know, in many ways, are the biggest influencer on the majority of the city council. The mayor’s office said that they couldn’t get key people to support this idea and so they let it go. If those key people were city council people, then Labor allowed this in part to not go forward. And I think that’s important to remember. They control the majority of city council, who would’ve been the part of putting this up.

PENNER: Thank you, Scott.

AUGUST: Well, you mean to tell me that Lorena Gonzalez said one thing and did something else? I find that shocking.

PENNER: Okay, JD – JW, let’s take the second point that our caller brought in and that had to do with if you’re a low income person is this really a regressive tax that takes more from you, a sales tax, than from somebody who is higher earning.

AUGUST: Well, you can’t disagree with that. Yes, it is. Yes, it is a regressive tax.

LEWIS: And there are other options right now for revenue increases that would not be regressive. There would be the trash tax, for example, that would be levied on half the city that already pays it and then – half the city already pays it but then half the city would city – be single family homes.

PENNER: I want to be sure we leave enough time to talk about the – another tax, the school parcel tax, so let’s hear from Alex in Rancho Bernardo and then we’ll get your final comments, everybody. Alex, you’re on with the editors.

ALEX (Caller, Rancho Bernardo): …for taking my call. I was wondering why doesn’t the city do the bankruptcy. That should be the option…


ALEX: …for the voters to decide. The other option is if there’s a shortage in revenues why don’t they do what, you know, Walmart talks about it, the roll back the prices and the service. I came here 20 years ago. The service was perfect, everything was perfect, taxes were low. I mean, I don’t understand it. If they have a low amount of money coming in, just go back to the year that, you know, that they had that same amount of money and spend the same amount of money and have the same workforce. I don’t see – Because, you know, they’re – the taxes are higher, they’re providing less service and it just doesn’t – the math doesn’t makes sense.

PENNER: Okay, thank you very much, Alex. Barbara, you used to be a business journalist way, way back. So how do you respond to Alex?

BRY: Well, Scott alluded to it. I mean, we’re paying off the pension deficit, you know, that – We’re paying for the sins of the past. And so, in fact, for a number of years we were not paying into the pension fund what we should’ve been and so that allowed us to provide, you know, the City services and now we have to pay, you know, for the pension deficit and that – and at a time that we’re in an economic recession so we’re really in a crunch.


BRY: And I know that Scott probably believes that bankruptcy should be a viable option.

PENNER: Scott is practically leaping across the table to get a remark in. Make it short, please.

LEWIS: All I want to say is that if we do a comprehensive package of – that would combine reforms with taxes, that’s basically bankruptcy lite. If you don’t want to do this comprehensive reform, then you want us to eventually go into bankruptcy.

PENNER: Okay. And a short one from you, JW.

AUGUST: Irony, irony, irony. Donna Frye lost the playoff…

LEWIS: Yeah.

AUGUST: …against the mayor because she wanted to put some – raise some taxes. And now the mayor has come full cycle and realized some wisdom in what Ms. Frye was thinking.

PENNER: And Donna Frye’s not running for any office this year, so we move on.