City-backed business tax hike to help balance Sacramento's budget seems headed for defeat

The local measure proposed to bridge Sacramento's projected $66 million budget shortfall by increasing business operations taxes is likely to fail.

In the latest tally Tuesday, Sacramento voters continued to oppose by 3 to 2 the city-backed Measure C, aimed at increasing tax rates for the first time since 1991. The margin by which voters have rejected the measure hase been consistent in the ballot returns issued in the two weeks since election night.

City officials have said if the measure were enacted most businesses would have received a tax decrease and major corporations instead would be liable for coughing up more money. It would have raised about $3.7 million in the first year and an estimated $6 million in its fifth fiscal year, according to city estimates.

But the initiative singled out categories of professionals — such as lawyers, surgeons, dentists, architects and others — to be responsible for higher rates no matter their annual earnings.

Tuesday's latest update showed about 62% of voters rejected the initiative, which requires a simple majority.

When asked about the referendum's apparent defeat, Sacramento city spokesman Tim Swanson wrote that the city respects the democratic process and will continue to provide high-quality programs, services and amenities.

The city is working to address the budget deficit through a combination of reducing expenses, increasing revenue, eliminating vacancies, using savings from the year's end and other strategies, he wrote in an emailed statement.

Sacramento residents and groups against the ballot measure — which included the No on Measure C campaign and North Natomas attorney Tiffany Clark — expressed gratitude for voters who appeared to recognize the initiative's drawbacks.

The No on Measure C campaign — a coalition that included the California Medical Association, the California Dental Association, the Sierra Sacramento Valley Medical Society, the Doctors Company and the Sacramento District Dental Society — said they made more than 168,000 phone calls just before the election to urge voters to reject the increase. The groups' opposition stemmed from believing Measure C posed a unique threat to small medical practices and access to care.

“We are thankful to the voters of Sacramento for recognizing the vital role small practices have in making our community healthy,” the No on Measure C campaign said Friday in a statement.

Clark, the attorney, said she has been heartened to see how the result shows their actions make a difference and that Sacramento residents listened.

Why Measure C ran into trouble

Clark said a majority of Sacramento voters would likely support increased revenue flowing to the city. But enough voters appear to have scrutinized multiple factors about Measure C, such as the process by which it was approved, its contents or both, Clark said.

The Sacramento Bee's Editorial Board had questioned the initiative's legality after city staffers failed to post the ordinance's language in the Sacramento Bulletin, the city's contracted newspaper, within 10 days.

The City Council approved Measure C on Nov. 14. Its text didn't appear in the paper until February and after The Bee's Editorial Board request a copy.

Sacramento Mayor Darrell Steinberg publicly said multiple times before the March primary election that he didn't believe Measure C would pass. Steinberg said in a statement that it was clearly not the right time for voters to consider a change because “there has been considerable controversy over how it was noticed.”

“The silver lining is that we can take this time to look at and improve our noticing procedures, which we will do,” Steinberg previously said in an emailed statement.

His comments came after he acknowledged a “mistake” during a Feb. 13 City Council meeting in which city staffers failed to post the ordinance's language in the Sacramento Bulletin in a timely manner.

“The original mistake was a mistake,” Steinberg said during the meeting. “But, it was not a mistake that ... in any way was attempting to mislead.”

Clark believes there was no ill intent by the city and hopes there is a more inclusive process going forward to create ordinances.

She said impacted small businesses weren't at the table when this initiative was created, excluding their input.

There was a lot of city money and time that went into creating Measure C, she said, that now appears to be failing.

“Nobody gained in this,” Clark said.