Cal City sets special parcel tax rate

Amount follows formula in voter-approved measure

CALIFORNIA CITY — The City Council on Tuesday set the annual rate for a special parcel tax at $160.60, the amount recommended by staff as following the formula laid out in the voter-approved measure establishing the tax.

The 3-2 vote, with Mayor Pro Tem Nick Lessenevitch and Mayor Jeanie O’Laughlin dissenting, followed a lengthy discussion centered on differing interpretations of the ballot measure and voters’ and prior Councils’ intent.

Cal City voters approved a special parcel tax in July 2018, with the revenues directed to support public safety operations. The tax was set at a maximum of $182.50 per parcel per year, with provisions to reduce the amount each year under a formula that takes into consideration increases in revenues from sales, property and marijuana industry taxes.

For 2021-2022, this formula calculated the required reduction at $21.90, bringing the maximum rate to $160.60, according to the staff report.

This calculation estimates increased tax revenues of nearly $1.4 million over the 2017-2018 base year. The bulk of this increase, $1.12 million, is from taxes on the marijuana industry. This revenue stream was not yet realized when the tax was passed.

Prior councils lowered the annual rate beyond what was required under the formula. In 2019-2020, when the reduction was zero, the Council lowered it to $172.50. In 2020-2021, the Council set the rate at $153.

Much of Tuesday’s debate was based on differing interpretations of whether the $153 rate set last year was a maximum rate going forward and how much special tax revenue the police and fire departments were entitled to.

Lessenevitch argued that the special tax measure stated it would produce an estimated $7 million in revenues to fund the police and fire departments, and that number should be used as the maximum amount budgeted to the departments, whether it is

from special tax or marijuana tax revenues. Any increases to the departments’ budgets should come from the General Fund, he said.

“All we’re guaranteeing is $7 million a year to fund public safety,” he said.

“The special tax is just an emergency gap measure to keep these agencies working, and as we are finally developing an industrial base paying taxes, we’re reducing the impact on the citizens,” Lessenevitch said.

By his calculations, the earlier $172 rate was actually higher than necessary, and the $153 closer to producing the amount he said was promised.

O’Laughlin noted that Lessenevitch’s calculations differed from those of the city accountant.

Councilmember Kelly Kulikoff argued that the current Council, which has four new members elected in the November 2020 election, should not be held to promises made by earlier councils to set the rate at a certain point outside the parameters of the ballot measure.

“I can’t vouch for a previous Council,” he said. “I don’t think we can lower the tax beyond the maximum just because some people didn’t feel like they got proper clarification on a matter.”

“This is what we need, this is what was voted on,” he said.

Former Councilmember Ron Smith, who was on the Council that lowered the rate to $153, said it was a promise made to voters in exchange for support of the measure, and should be considered the maximum rate to honor that promise.

O’Laughlin said the difference between the recommended $160.60 rate and the prior $153 rate is only about $385,000, “which is more than made up in the cannabis (tax).”

“I think that we can absorb that in our budget,” she said.

All agreed that the city is unlikely to see another special tax measure pass once the current one expires in 2024, and the city will eventually need to absorb the costs of the police and fire departments into its general fund revenues.

That fact caused some to see the need for reducing special tax revenues now to help prepare for the special tax’s end, while others saw it as a reason to bolster public safety funds while the special tax funds are available.