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Attachment 2 PREPARED BY: STEPHEN CONWAY FINANCE DIRECTOR Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832 www.losgatosca.gov TOWN OF LOS GATOS FINANCE COMMITTEE REPORT MEETING DATE: 12/04/2017 ITEM NO: 4 ITEM NO: 11 DATE: November 29, 2017 TO: COUNCIL FINANCE COMMITTEE FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT RECOMMENDATION: Review and discuss update on a potential 1/8 cent sales tax measure for the November 2018 ballot. BACKGROUND: On November 7, 2017, the Town Council reviewed the recommendation of the Council Finance Committee to proceed with preparing a ballot measure to place a 1/8 cent general sales tax on the November 2018 ballot for Los Gatos priorities. At the conclusion of the Council discussion and public testimony, the Town Council directed staff to have the Council Finance Committee review and discuss both the option of a general sales tax and a special sales tax. This staff report provides additional sales tax information prior to the preparation of proposed ballot language for both a general tax and a special tax, which will be discussed with the Council Finance Committee in February. DISCUSSION: Types of Local Sales Tax Measures Whether the ballot measure requires a simple majority (50% + 1 vote) or a super majority (two- thirds of those voting in the affirmative) depends upon the ballot language and whether the question is placed upon the ballot as a general tax increase or a special tax increase. A "general tax" may be used for any public purpose — the funds are fully discretionary and may be PAGE 2 OF 6 SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT DATE: NOVEMBER 29, 2017 N:\MGR\AdminWorkFiles\Council Committee - FINANCE\2018\2-12-2018\Item 5 Attachment 1.docx 2/9/2018 4:40 PM SLL deposited into the General Fund. A majority vote (50% + 1) of the electorate is required to impose, increase, or extend a general tax. A general tax may only be put on the ballot at the same general election when the Town Council election is held, unless the Council unanimously finds that there is an urgent need to impose the tax measure. Upon such unanimous declaration, the general tax measure may be put before the voters at a special election. A "special tax" is a tax imposed for a specific purpose. For example, some cities dedicate tax revenues for the payment of law enforcement or street maintenance costs rather than using the taxes for the general operations of government. A two-thirds majority of voters is required for special taxes. Special taxes may be placed before the electorate at any time, either during a general election or in a special election. As the table below illustrates there have been six sales tax measures placed on the ballot in Santa Clara County since 2008. Of the six measures, four were for general sales tax and two were for special sales tax. With the exception of the 2014 Gilroy measure, the remaining five measures passed. Measure Year Increase Sunset (years) General/Special Pass or Fail Percent SC VTA 2016 (Nov) 0.5% 30 Special Pass 71.7% San Jose 2016 (Jun) 0.25% 15 General Pass 61.4% Gilroy 2014 (Nov) 0.5% 15 General Fail 45.3% SCC 2012 (Nov) 0.125% 10 General Pass 56.6 SC VTA BART 2008 (Nov) 0.125% 30 Special Pass 66.8% Campbell 2008 (Nov) 0.25% 0 General Pass 70.5% PAGE 3 OF 6 SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT DATE: NOVEMBER 29, 2017 N:\MGR\AdminWorkFiles\Council Committee - FINANCE\2018\2-12-2018\Item 5 Attachment 1.docx 2/9/2018 4:40 PM SLL All of the measures with the exception of the 2008 Campbell sales tax had some form of a sunset clause. In addition, as the ballot language below illustrates the majority of the initiatives reference some form of oversight and/or fiscal accountability. Many of the initiatives also reference local control. Measure Name Ballot Question Santa Clara Valley Transportation Authority, California, Transportation Infrastructure Sales Tax, Measure B Nov 2016 Special To relieve traffic, repair potholes; shall VTA enact a 30 -year half-cent sales tax to:  Repair streets, fix potholes in all 15 cities;  Finish BART extension to downtown San Jose, Santa Clara;  Improve bicycle/pedestrian safety, especially near schools;  Increase Caltrain capacity, easing highway congestion, improving safety at crossings;  Relieve traffic on all 9 expressways, key highway interchanges;  Enhance transit for seniors, students, disabled; Mandating annual audits by independent citizens watchdog committee to ensure accountability San Jose, California, General Sales Tax, Measure B Jun 2016 General “To fund essential City services such as: improving police response to reduce violent crimes and burglaries; improving 911/emergency medical/fire response times; repairing potholes and streets; expanding gang prevention; and maintaining the City’s long -term financial stability, shall the City of San Jose enact a ¼ percent sales tax for 15 years, providing about $40 million annually, requiring Independent Citizens Oversight with public review of spending, and all revenues controlled locally?” City of Gilroy Safety and Quality of Life, Measure F Nov 2014 General “To improve local quality of life and maintain essential City services, including police/fire protection; gang suppression/prevention; 9-1-1 emergency response; street/pothole/sidewalk repairs; earthquake safety; at-risk youth programs; park repairs; and other general services; shall the City of Gilroy enact a half cent sales tax for 15 years with authority to incur debt to accelerate infrastructure projects, requiring independent audits, public review and no money for Sacramento?” Santa Clara County Sales Tax Increase, Measure A Nov 2012 General "Shall the County of Santa Clara enact a one-eighth cent sales tax, that cannot be taken by the state, for local priorities such as:  Law enforcement and public safety;  Trauma and emergency room services;  Health coverage for low-income children;  Economic development and job creation;  Housing for the homeless; and  Programs to help students stay in school; for a limited period of ten years, with annual public reports to ensure fiscal PAGE 4 OF 6 SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT DATE: NOVEMBER 29, 2017 N:\MGR\AdminWorkFiles\Council Committee - FINANCE\2018\2-12-2018\Item 5 Attachment 1.docx 2/9/2018 4:40 PM SLL accountability?” Santa Clara VTA sales tax for BART, Measure B Nov 2008 Special "To reduce dependence on foreign oil, help relieve soaring gas prices and combat climate change, shall the Santa Clara Valley Transportation Authority enact a 1/8 cent sales tax limited to thirty years for BART to operate/ maintain/ improve the 16.1 mile Santa Clara County BART extension, with stations in Milpitas, San Jose, and Santa Clara, connecting with Caltrain from Gilroy to San Francisco and an Airport People Mover, to be collected only if sufficient state/federal funds are secured to match local con struction dollars?" City of Campbell Sales Tax, Measure O Nov 2008 General "In order to maintain and protect City services and facilities, such as City streets and pothole repair, fire protection and 911 emergency medical services, police patrols, neighborhood watch and crime prevention programs, the Community Center, recreation programs, and parks, shall the City of Campbell be authorized to enact a one -quarter cent sales tax, with all proceeds placed in the City's General Fund with independent annual financial audits?” Sales Tax Ballot Measure Timeline Provided below is an estimated timeline in the standard ballot measure sequence of Election (E) minus requisite days format. The timeline provided is based on last year’s schedule posted by the Santa Clara County Registrar of Voters. The current year’s schedule has yet to be posted but staff doesn’t anticipate that dates will differ materially from the information below. Date(s) E Minus Action June 19 E-140 Last day to adopt Ordinance June 19 E-140 Suggested last day for Council to adopt resolutions June 19 E-140 Suggested last day to post Notice of Deadline for Filing Arguments and Impartial Analyses No deadline except ONCE before Election Day Elections Official to publish Notice of Election – Measure(s) Only, No Candidates PAGE 5 OF 6 SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT DATE: NOVEMBER 29, 2017 N:\MGR\AdminWorkFiles\Council Committee - FINANCE\2018\2-12-2018\Item 5 Attachment 1.docx 2/9/2018 4:40 PM SLL 7-14 days after Council puts Measures on the ballot Suggested last day to file Arguments & Impartial Analyses August 10 E-88 Last day to Call Election for Ballot Measures August 10 by 5 p.m. E-88 Last day for County to receive Resolutions requesting services for consolidation August 15 E-83 Last day to Withdraw Measures from the Ballot August 23 E-75 Time to Cancel Election – Insufficient Candidates November 6 ELECTION DAY Based on the timeline above, staff believes that pending the outcome of Council Finance Committee deliberations in February, sufficient time exists for Town Council deliberations, and if directed, drafting ordinances for submittal in June. CONCLUSION: Staff is continuing to review previous ballot measures and will bring proposed ballot language and additional information to the Council Finance Committee in February. COORDINATION: This report was coordinated with the Town Manager’s Office, the Town Attorney’s Office, and the Finance Department. FISCAL IMPACT: Total election costs for the Town for three Council seats and on e ballot measure are yet to be determined, however, the cost for two seats and one ballot measure in 2016 was approximately $120,000. In addition under the Revenue and Taxation Code section 7272, the Board of Equalization (BOE) will bill a new special taxing jurisdiction for preparatory charges to PAGE 6 OF 6 SUBJECT: REVIEW AND DISCUSS UPDATE ON A POTENTIAL 1/8 CENT SALES TAX MEASURE FOR THE NOVEMBER 2018 BALLOT DATE: NOVEMBER 29, 2017 N:\MGR\AdminWorkFiles\Council Committee - FINANCE\2018\2-12-2018\Item 5 Attachment 1.docx 2/9/2018 4:40 PM SLL administer the new district tax based on actual costs after the tax has been submitted by the various BOE units’ actual charges. The statutory maximum amount of preparatory costs shall not exceed $175,000.