Vote no on extending Sonoma’s half-cent sales tax

The Sun recommends a NO vote on Measure U, the extension of the half-cent sales tax within the City of Sonoma. Understanding why requires a review of how Sonoma managed to arrive at its latest financial difficulty.

The story begins in 1994, when an audit of the city’s finances revealed that the City of Sonoma was nearly bankrupt. For years, City Council had been told that the city had reserves of one-million dollars (not an insignificant sum in 1994), but the audit showed it was actually one-million dollars in debt. City Council was suddenly faced with not having enough cash in the bank to make city payroll. The auditor reported twenty-one “reportable conditions” under municipal accounting standards, including having broken covenants on bonds the city had issued.

This shocking revelation required the city to completely revamp its financial controls, institute austerity measures, and plot a course back to financial health under the guidance of a new City Manager. It took six long years, but by 2000, the city was in healthy financial condition. At the end of 2006, the city had accumulated over $8 million in reserves in the bank.

By 2007, the City Council members had almost entirely changed, and institutional memory of the near financial disaster the city had faced had faded. Financial decisions began to get made which slowly reduced the revenue stream coming into city coffers. For example, the 25-year-old Park and Lighting District assessment areas were dissolved, and over $200,000 in yearly revenue was lost.

Further adjustments awaited, the most telling of which was the elimination of the city’s Redevelopment Agency. In 2012, after pressure by Governor Brown, the state legislature eliminated local redevelopment agencies and the state funding they received. By law, 20 percent of that funding had to be used for affordable housing programs, and the balance for “economic development” projects.

Redevelopment finance was hardly conventional. To receive state funding, a local agency had to show a deficit in its account. In practice this meant that funds needed to be fully committed before the state would make a payment to an agency. Accordingly, the city’s Redevelopment Agency would issue 20-year bonds to fund projects, and use this indebtedness to justify receiving money from the state.

Governor Brown had learned first-hand as Mayor of Oakland that when it came to state funding for redevelopment, lots of “games” could be played, and almost every city – including Sonoma – played them. For instance, funding for Sonoma’s Visitor’s Bureau was provided by using Redevelopment Agency funds. The effects of the 2008 financial crisis on state revenue and such “borderline economic development uses” convinced the Governor to end state funding and dissolve local redevelopment agencies.

In the City of Sonoma, a large measure of its payroll was being paid out of Redevelopment Agency funds: public works, water department, building and planning…sometimes up to 40 percent of payroll was covered with state redevelopment funds. Thus, it was the subsequent loss of those funds that largely fueled the need for the half-cent sales tax that is now up for renewal.

This brings us to our objection to that renewal. When passed, the original tax was planned to expire in 2017, By then, we were assured, new revenue sources would be in place and it wouldn’t have to be renewed. But the City did nothing new to raise revenues.

In fact, it spent like there no tomorrow, becoming a soft touch for long-term subsidies to business interests. For example, the Tourism Improvement District, essentially a marketing department for the City’s multi-million dollar hotel industry, was created and extended to ten years, collecting and spending what will soon be nearly a million dollars a year, money that could have have gone into the city treasury as TOT. The Visitor’s Bureau, now a brick and mortar dinosaur in the Internet Age, was given $100,000/yr. for three years. The local Chamber of Commerce received $125,000/yr. for two years for “economic development”, and a nowhere-in-sight swimming pool to be built outside city limits was given a commitment of $25,000/yr. for ten years. There were also “forgivable loans” made to private businesses in the city.

Suggestions to raise the City’s TOT by two percent, and ideas to raise revenue for affordable housing were ignored. In short, having handed millions to private business interests the city now asks the local tax-payers for more money in the form of a regressive tax that burdens those least able to afford it. It’s just not right.

Adjusting to the loss of sales tax revenue won’t be easy, but it can be done. For example, Code Enforcement activities, vigorously pursued, could be self-funding and add significantly to revenue by recouping lost taxes, fees and fines now going unpaid. And being ‘business-friendly’ should mean befriending only those businesses that generate significant tax revenue and provide good-paying jobs to city residents.

The City of Sonoma needs to demonstrate that it can be and is serious about being financially responsible, creative and forward-thinking. Sometimes this lesson has to be learned the hard way, and unfortunately, it looks like once again this is the case. Vote No on Measure U.

–Sun Editorial Board