Voters to decide on new quarter-cent sales tax measure

City officials say the levy is needed to offset big coronavirus budget impacts

MILPITAS >> As city funding sources take a major hit due to the coronavirus pandemic, the Milpitas City Council voted unanimously Tuesday to place a quartercent sales tax measure on the November ballot, hoping residents will approve it to help maintain basic services.

The sales tax measure, if approved by voters during the Nov. 3 general election, would last eight years, raise the city’s tax rate from 9% to 9.25% and is estimated to generate about $6.5 million annually for the city. It would require a simple majority of voter support to pass.

“Our city is bleeding. Every

city is bleeding. Every level of government is hurting right now,” Mayor Rich Tran said during a virtual council meeting Tuesday night.

“This sales tax proposal is the best chance that the city has to mitigate the loss in revenues.”

The city’s finance director, Walter Rossmann, told the council he’s still not sure how bad things will be in the near future, but noted the city has already seen significant hits to hotel taxes, one of the city’s major revenue sources, and sales taxes, and is leaning on reserves to cover budget shortfalls.

“I know the (hotel tax) revenue for the month of June was $200,000, the average before was $1 million,” he said.

“We’ve lost maybe $11 million in revenue” overall, since the pandemic began in mid-March, Rossmann said. The city’s general fund budget for the current 2020-21 fiscal year is about $112.5 million.

“It’s not changing, that’s the challenge we’re having,” Rossmann said. “The SIP has been extended. We can’t go to the malls, our residents are locked up at home, and that all impacts our revenues.”

Some council members, including Anthony Phan and Carmen Montano, at one point during the meeting suggested the city should use the potential tax funds to hire more people and spend more on things such as the city’s rent relief program.

Staff reminded the council these funds would be used mainly in an effort to avoid cuts to city services like police, fire, recreation services and economic development.

However, because it is a general tax, if it were to be approved, the funds could ultimately be used for anything the city council sees fit, as evidenced by the dialogue between Montano and Tran, in which she suggested the rent relief program should be boosted, and he interjected to say the money would be focused on supporting public safety.

Councilwoman Karina Dominguez, who eventually supported the tax, at first expressed concerns about the lack of guarantees of what the money could be used for, noting she wouldn’t want to see it used on building a new police station.

She also outright questioned whether a sales tax was warranted during a tough financial time for many.

“When we tax our community when they don’t have any money and they are losing their homes, it could break the working class,” she said.

Dominguez said she thinks the city should have looked at other solutions first, such as asking “multibillion dollar companies” in Milpitas to “help us out,” especially those making money off the pandemic.

Tran, who has had an icy working relationship with Dominguez, interrupted her multiple times, at one point asking her, “Do you have a better idea” than the tax measure?.

“This is the 11th hour, where were you in April, May, June, July,” Tran said.

Dominguez pushed back, saying the mayor was “gaslighting” her, and that she wouldn’t bring forth an idea to the council without thoroughly exploring it first.

The council also requested there be a citizens oversight committee for the money, if the tax were to be passed.

City staff reports say it will cost the city about $30,000 to place the measure on the local ballot, and the city also plans to spend between $35,000 and $45,000 on a consultant who will do “educational outreach” to voters about the measure. The city plans to pay for these costs with money from its reserves.

The council on Tuesday also appointed Tran and Phan to be the two council members who will help draft arguments in favor of the measure for voter guides.