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Escondido’s potential sales tax measure explained

ESCONDIDO — The Escondido City Council is considering putting a tax measure on the November 2022 ballot that would implement a 1% sales tax increase citywide.

The current sales tax rate in Escondido is 7.75%, which is the base rate for San Diego County. This includes the statewide rate of 7.25%, plus a half-cent for San Diego County’s TransNet program. Of that amount, the city receives only 1%.

The measure, if approved by voters, would implement a sales tax increase that would generate $25 million annually in new revenue for maintaining city services. The council rejected a similar resolution in July 2020.

According to City Clerk Zack Beck, 291 of the state’s 482 cities (60%) and 36 of the state’s 58 counties (62%) have approved a transaction and use tax similar to the measure that Escondido is considering.

Many of these cities have at least an 8.25% tax rate, such as Del Mar, Oceanside, Vista, El Cajon, Chula Vista, Imperial Beach and La Mesa.

Based on the city’s May 2021 budget report, Escondido faces a budget deficit of $8 million in FY 2021/22, a $13 million deficit by FY 2023/24 and a structural budget deficit of more than $150 million in the next 20 years.

Over the years, the city has continually had to find other ways of decreasing costs including deferring infrastructure maintenance, outsourcing services, instituting pension reform, increasing employees’ share of benefit packages, reducing the city’s workforce by 126 full-time employees below pre-recession levels (while Escondido grew by 8,000 residents during this time), updating city fees, installing cost-saving technology and more.

“As the local economy slowly recovers from the pandemic and yet no new revenue source has been identified for the upcoming fiscal year, the cost reductions to prepare and balance the budget for FY2021/22 would require a significant impact on city staff and the services the city provides. Compounding the issue is the increasing pressure for city services, particularly in the areas of traffic safety and homelessness,” the budget report said.

“Until revenue is increased on an ongoing and structural basis, the city must continue to rely on a short term, one-time resources to continue operations and avoid drastic cuts to city services.”

Last year, the city conducted a community survey in which 71% of residents expressed support for the measure, which would address the budget deficit, as well as fund projects and programs in the community.

A unanimous vote was needed to put the measure on the ballot last year, but the motion failed 3-1 with Mayor Paul McNamara, Councilwoman Consuelo Martinez  and former Councilwoman Olga Diaz voting for the measure, while Councilman Mike Morasco voted against it.

Morasco said during last year’s meeting that he was concerned that because of the COVID-19 crisis, it might not be the right time for an increased sales tax. Morasco added that with three council seats up for election and preparations underway for a new city manager and new assistant city manager, the council should wait until after the November 2020 elections to consider it.

“I’m not crazy about raising taxes, but there’s a reality staring us in the face. I think that if we don’t bring in other revenues, we’ll create a downward spiral,” McNamara said at last year’s meeting.

The current resolution is being considered by an ad hoc subcommittee that the council created in October. The council agreed to have McNamara and Morasco serve on the subcommittee to review the city’s financial status and determine whether the tax measure should be put on the ballot.

It is still unclear when the subcommittee will present its findings and recommendations to the council.