Signal Hill .75-cent tax hike on November ballot

Measure R may raise $5 million per year in additional sales tax revenue, but opponents allege financial mismanagement.

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Signal Hill voters will decide by Nov. 3 whether the city’s sales-tax rate should increase from 9.5% to 10.25% and possibly generate an extra $5 million for the city annually.

The extra tax would boost Signal Hill’s revenue by 22%, based on its current 2020 projected revenue of $22.5 million.

The City says it would use those additional funds for “community-identified priorities,” including: fixing streets and potholes, maintaining sidewalks, trees, storm-drains, and park facilities; preparing for natural disasters, public-health emergencies and 9-1-1 emergency-response times; and addressing homelessness and crime.

City Manager Hannah Shin-Heydorn said the council approved adding the measure to the ballot this past summer, after approving a budget with lower revenue projections and resulting cuts to City services.

“Signal Hill has been affected by the recent financial effects of COVID-19,” Shin-Heydorn said at the Oct. 13 Signal Hill City Council meeting.

As businesses closed in March due to state and county health mandates, the City’s sales-tax revenues declined by about 35% from its auto industry and 50% from restaurants and hotels, according to the proposed measure.

“The City projects revenue losses of $2.1 million in the 2020 budget and $600,000 in the police department alone,” former City Attorney Dave Aleshire states in an impartial analysis of the measure.

See related story: SH City Council approves 2020-2022 budget with reduced revenue and personnel cuts

Moreover, 90% of the sales tax collected in Signal Hill currently goes to the county or the state, with only one cent for every dollar remaining with the City, Shin-Heydorn said.

All funds generated by Measure R would remain in the city to support its services, she added.

Measure R’s proposed tax rate of 10.25% makes the city’s tax equal to nearby cities, including Long Beach, which completely surrounds Signal Hill.

Both residents and visitors would pay the additional ¾-cent sales tax on items purchased in the city, Shin-Heydorn said.

“It is not a tax on your home or property,” she said. “And it is not applied to food you purchase as groceries or as prescription medication.”

Moreover, if Measure R is not enacted, Shin-Heydorn warned that LA County or a related regional agency could raise the rate anyway with a countywide majority vote.

“If that happens, the funds raised– including those raised in Signal Hill– would go to the County,” she said.

To pass, Measure R needs a majority of Signal Hill voters to choose “yes” on their Nov. 3 election ballots.

Opposition
Aleshire’s impartial analysis notes that Measure R would not only cover the City’s projected sales-tax losses due to COVID-19 but buffer projected expense increases.

However, opponents of Measure R argue that the analysis is not impartial because it does not include the “cons” of the measure.

“It is one-sided, incomplete and misleading,” they contend in a rebuttal to arguments in favor of Measure R.

Among those cons are that the tax never expires and applies not only to items purchased in Signal Hill, but items Signal Hill residents purchase online through retailers such as Amazon, Ebay and Etsy.

Carol Churchill, an attorney and former city councilmember, and Maria Harris, a retired public-administration professor, cite “decades” of financial mismanagement in their opposing ballot argument, including that the council diverted funds toward real-estate development and restaurants rather than higher sales-tax generating enterprises.

They also implicate the council in mishandling contracts with a Nissan car dealership and Office Depot retailer, and for borrowing funds to “build a massive ‘Taj Mahal’ library used only by a few city residents.”

Churchill and Harris contend that the City has already increased property taxes, bond debt, and assessments and fees for sewers, storm-drains and library services.

“Higher taxes are exactly what we do not need now because people living and shopping in this city are losing jobs, cannot pay rent or afford groceries,” they argue.

Moreover, the tax law would not restrict how Measure R revenue is spent.

The impartial analysis states that “funds generated by the proposed tax would be placed in the City’s general fund, are unrestricted, and may be used for any City general-fund purposes,” not limited to infrastructure, emergency response or crime prevention.

“The promises to fix potholes, pay police and fund crime-prevention are not binding,” Churchill and Harris point out.

A rebuttal to the opposing argument written by four Signal Hill residents doesn’t address this point, but tells voters not to be “misled by political grandstanding and rhetoric.”

Sales-tax dependence
Signal Hill is heavily dependent on sales taxes, which represent 65% of its total operating revenue.

The city council unanimously approved adding Measure R to the ballot on July 28, but discussed the increase even earlier, during its budget workshop in May, anticipating a large revenue shortfall due to pandemic-related closures and business slowdowns.

See related story: SH City Council considers raising taxes during budget workshop

The City has also been projecting a structural financial deficit in the near future as increasing expenses– mostly caused by ballooning pension and insurance costs– are outpacing stagnant revenues.

To help address that concern, the city council has been tentatively exploring allowing cannabis businesses to operate in the city, mostly for the boost in tax revenue that would generate.

See related story: https://signaltribunenewspaper.com/51432/community/wanted-cannabis-consultant/

Though not all councilmembers approve allowing marijuana businesses in the city, there has been very little council opposition to a tax increase.

See related story: Voters to decide on raising Signal Hill sales tax to 10.25%

“By keeping our city safe, clean and well-maintained,” the proposed Measure-R ordinance states, “additional funding will help enhance our property values and keep Signal Hill a great place to live.”