Santa Clara supervisors to consider 5/8-cent sales tax increase to continue county expansion

SAN JOSE — To sustain and continue the expansion of Santa Clara County government, Supervisor Cindy Chavez is trying to persuade her board colleagues to put a 5/8-cent sales tax increase on the November 2020 ballot.

The extra money will be needed to increase health care and social services while also giving the county a cushion in case of major federal and state funding cuts, she says.

“We are the safety net and backbone for many people in the community,” Chavez said Thursday in an interview. “This money can’t be taken from us by the state or federal government … and I want to create as much certainty at the local level so we can continue to do good work in health care, public safety and social services.”

The Board of Supervisors agreed Tuesday to consider Chavez’s proposal at its Sept. 10 meeting. If at least four of the supervisors choose to put the proposed tax on the ballot and voters approve it, the county would be able to add an estimated $250 million a year to a budget that has grown from $4.9 billion to $8.1 billion in the last five years. This year’s budget alone is 15.6 percent larger than the previous year’s and includes an almost 10 percent increase in the county workforce, or more than 1,800 new positions.

A 5/8-cent increase would raise the countywide sales tax from 9 to 9.625 percent, although consumers will pay more in certain cities where additional taxes are levied. That would be more than the 9.25 percent county sales tax rate in Alameda and San Mateo counties, currently the highest in the Bay Area, according to the California Department of Tax and Fee Administration.

Money from a 5/8-cent sales tax increase would go into Santa Clara County’s general fund, which isn’t restricted to any specific use and can be spent as the supervisors wish.

A similar 5/8-cent sales tax proposal in June 2018 failed to muster the four votes needed to make it on the ballot. Instead, the supervisors asked voters to renew a 1/8-cent sales tax with no expiration date, and 78 percent approved it in the November election.

When supervisors discussed that increase last year, the Trump administration was threatening to repeal the Affordable Care Act, cut food stamp programs and change eligibility rules for MediCal, which according to a memo from budget director Greg Iturria would have resulted in at least $55 million in cuts from those three programs alone.

While those cuts haven’t happened, they’re still a possibility, Iturria said in an interview this week, noting that 35 percent of the county’s revenue comes from the federal government.

Chavez said the sales tax increase could finance expanded support for survivors of sexual violence, upgrades to the county’s two recently acquired hospitals, enhancement of mental health services and other worthwhile needs.

“We know we have an upswing of anxiety and depression among young people, and I look at those emerging trends that demonstrate concrete needs for services we provide,” Chavez said.

The board also has received letters from advocates who want to see a permanent source of funding for a program to encourage farmland preservation that supervisors launched but haven’t yet found money for.

County CEO Jeff Smith warned supervisors at budget hearings earlier in the summer that this is likely the last year of growth before the economy and red-hot property market slow down.

Although the county’s current budget is $8.1 billion, more than half is state and federal money allocated for mandated services and only $1.7 billion is considered discretionary, meaning it can be used for a broad array of purposes.

As for the 1,800 new county jobs, most were added as part of a massive expansion of the county’s hospital system in March, when it bought O’Connor Hospital in San Jose, St. Louise Regional Hospital in Gilroy, and DePaul Health Center in Morgan Hill.

“The county CEO has been cautioning all of us against starting anything new … (but) we have to be strategic and bold, and it does not seem strategic for us to maintain the status quo relative to services and the needs of our workers,” Chavez said.

It’s unclear whether Chavez will have the three other votes needed to put the tax increase on the ballot. Last year, Supervisor Joe Simitian, who abstained from Tuesday’s vote, and Supervisor Mike Wasserman voted against the sales tax increase.

Wasserman on Tuesday said he wouldn’t support a hike this time either, calling sales tax increases regressive because they impact the poor more than the wealthy.

“A sales tax just adds on to everything a person buys except for food, and increases the cost of living,” Wasserman said at the meeting. “The economy is slowing down, and I’m concerned about raising the daily cost of living in Santa Clara County.”

Addressing speakers who cited the housing crisis as a reason for the increase, Wasserman pointed to $950 million in spending that voters authorized under a 2016 bond measure for affordable housing, about $234 million of which already has been allocated.

“We still have 700 million to give out to support affordable and transitional housing,” Wasserman said.

Simitian declined to comment on Chavez’s latest proposal, but at a meeting in June 2018 he pointed to rapid growth in the county’s budget.

“This is not about being anti-tax … I just think we can’t go out to the public and make the case that we need another 200 million dollars a year in perpetuity,” Simitian said.

He said sales tax increases by the county effectively take away the ability of local cities to do the same.

“It has the practical political effect of eliminating the potential for local jurisdictions to put a sales tax matter on the ballot, not as a legal matter, but as they’re simply going to say, our community can’t take an additional sales tax, as we’re already one of the highest sales tax counties in the Bay Area,” Simitian said.

Iturria’s budget memo also points to rising retirement costs for the county’s workforce due to changes by the state’s pension fund to make up for lower-than-expected investment returns, which would increase the county’s annual pension contribution by at least $60 million for the next five years.

The county also is expecting medical insurance costs for its growing staff to increase by an average of $32 million a year, according to Iturria’s report.

Pierluigi Oliverio, a former San Jose city councilman and director for the Silicon Valley Taxpayers Association, said voters should be wary of tax increases that aren’t set aside for a specific purpose.

“I’m skeptical of an unrestricted tax increase that can be spent indiscriminately,” Oliverio said. “I don’t think they (the county) are a good steward of taxpayer dollars.

He said he believes the new tax revenue would end up paying for rising employee pension costs, rather than services for residents.

“Isn’t this really just a way to fund those increased pension costs, and they’re just using the federal government and the current administration as an excuse?” Oliverio said.

Even if her colleagues don’t agree with a tax increase, Chavez said they should put the issue before voters.

“These are thoughtful, important questions,” Chavez said. “What I’m asking my colleagues to do is place this on the ballot to allow the community to decide.”

Contact Thy Vo at 408-200-1055 or tvo@bayareanewsgroup.com.

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