CC 2022-05-24_11b Local Transaction and Use Tax Measure_PP PresentationCONSIDERATION OF PLACING A LOCAL TRANSACTION AND USE TAX (“SALES TAX”) MEASURE ON THE NOVEMBER 8, 2022 BALLOT
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Outline
Background
April 26, 2022 Discussion and Direction
Proposed Measure
Next Steps
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Background
May 28, 2019 - City Council discussed the City’s revenue and potential opportunities to increase revenue
Council directed staff to seek more information about community surveys and the ballot measure process for a potential local sales tax increase
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Background
August 13, 2019 - Council authorized the City Manager to select a professional research firm to conduct a voter opinion survey of Arroyo Grande voters
January 28, 2020 - Council received a presentation of the community survey results from True North Research
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Background
Survey Results:
Consisted of a statistically valid sample (541 residents)
Arroyo Grande residents, at the time, have a high opinion of the quality of life in the City and value the services provided
These sentiments translated into “solid natural support (57%)” for establishing a one percent local sales tax to provide funding for general City services
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Background
June 23, 2020 - Council received a comprehensive presentation regarding a proposed revenue measure and directed staff to prepare a proposed 1% local sales tax revenue measure for the
November 3, 2020 ballot
July 14, 2020 - Council extensively considered and discussed the proposed sales tax measure. Ultimately, Council did not direct pursuit of the measure at that time due to unknown financial
impacts as a result of the COVID-19 pandemic.
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Background
April 27, 2021 - Council considered and established goals and priorities for incorporation into the Biennial Budget and included within FY 2021-23:
Investing in the Future
Investing in City Infrastructure and Facilities*
* Including “identify and pursue short- and long-term funding mechanisms, such as a sales tax measure, for pavement maintenance and other infrastructure maintenance needs.”
Investing in People
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Background
April 26, 2022 - Council received a comprehensive report and presentation regarding the City’s pavement, sidewalk, and stormwater infrastructure maintenance needs, including a 2022 Pavement
Management Program Update and a discussion of financing options
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April 26, 2022 Discussion
Streets
Despite past efforts, the condition of the City’s streets, sidewalks, and stormwater infrastructure have declined
The City’s streets now rank an average Pavement Condition Index (PCI) of 56, down from an average PCI of 69 in 2016
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April 26, 2022 Discussion
Streets
In order to maintain an overall PCI of “Fair” (PCI range: 51 – 70), approximately $6.25 million is needed annually, with the City only able to allocate $1.25 million annually from existing
resources
At the current funding level of $1.25M/Yr., it is predicted the PCI of the entire system will continue to deteriorate from 56 to 35 in 10 years, which falls in the Poor Condition category
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April 26, 2022 Discussion
Sidewalks
In 2016, sidewalk segment repairs estimated a total cost of $1,346,250, with the City being able to allocate an average of $120,000 annually
Stormwater
Approximately 2.57 miles of existing corrugated metal pipe facilities to be lined or replaced before failure
The estimated cost of lining is approximately $4 million
In 2016 it was estimated $238,000 is needed annually for repair, replacement, and maintenance of stormwater infrastructure, with the City being able to allocate $100,000 on average
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April 26, 2022 Discussion
Based on identified needs and current funding sources, there are no long-term options available that can overcome the condition and replacement costs of City streets, sidewalks and stormwater
infrastructure without a new and significant source of income
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April 26, 2022 Council Direction
Following consideration and discussion of the presentation, City Council provided direction to staff to prepare a proposed 1% local sales tax revenue measure for the November 8, 2022
ballot
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Base Sales Tax Distribution
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Distribution With Potential New Sales Tax Measure
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Regional Sales Tax Amounts
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Proposed Measure
If a 1% increase from 7.75% to 8.75% local sales tax is approved by voters, this will result in…
an estimated generation of approximately $5,600,000 annually
Updated Measure O-06 revenue estimates from HdL indicate approximately $2,797,000 in FY2021-22 1% measure would generate twice that
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Proposed Measure
The main goals of the proposed sales tax revenue measure are:
To address the City’s future funding needs for critical City infrastructure, including maintenance and repair of streets, sidewalks, potholes, stormwater and drainage facilities, as
well as other needed City programs and facilities
If approved, the proposed sales tax measure would augment the existing Measure O-06 local sales tax fund created in 2006
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Proposed Measure
To ensure accountability and transparency:
Public review by the City Council every five (5) years to determine whether the sales tax is necessary to remain in effect.
Provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds.
If other funding sources became available to replace the sales tax revenue, the City Council would have the authority to reduce or eliminate the local sales tax amount.
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Next Steps
May 24, 2022 - Adopt a Resolution placing a local transaction and use tax (“sales tax”) measure on the ballot for November 2022 and introduce an Ordinance adding a Chapter to the Arroyo
Grande Municipal Code related to a transactions and use tax (subject to voter approval)
Must be approved by 2/3rds (4 of 5) the City Council in order for the public to vote on the measure
Requires 50%+1 voter approval
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Next Steps
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Next Steps
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Next Steps
*Revised argument provided by the City Attorney in May 24, 2022 Supplemental Memo
Public outreach and education will occur through November with the assistance of a consultant (<$25,000)
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Recommendation
Adopt the proposed Resolution ordering the submission to the qualified electors of the City a measure relating to the establishment of a local transactions and use tax (hereinafter referred
to as a "sales tax") at the General Municipal Election to be held on Tuesday, November 8, 2022, as called by Resolution;
Introduce the proposed Ordinance adding Chapter 3.23 to Title 3 of the Arroyo Grande Municipal Code regarding a transactions and use tax;
Adopt the proposed Resolution setting priorities for filing a written argument regarding a City measure and directing the City Attorney to prepare an impartial analysis of the measure;
Adopt the proposed Resolution providing for the filing of rebuttal arguments for City measures submitted at municipal elections; and
Approve the argument* to be submitted in favor of the measure.
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