Tuesday, May 17, 2011

Blog #16 - Local Sales Tax for Fairfax?

What is a local sales tax?

A local sales tax is a tax to purchases made within the Fairfax Town limits on retail taxable goods. In California only durable goods are taxed. Food and services are not taxed in California. A typical time frame for a local sales tax is anywhere from five to ten years. All revenues collected from this local sales tax stays in Fairfax and cannot be taken by the State!!

Why does Fairfax need a local sales tax?

The Town is facing a $350,000 budget shortfall. The budget shortfall is a structural deficit that will have to be addressed later this year when the Town Council adopts the fiscal year 2011/12 budget. The causes are steep annual increases in health care and retirement costs for Town employees and declining property and sales tax revenues for the past three years.

Without making any changes to the expenditures and revenues the Town budget is not sustainable.

Pensions: The recession hit a number of investment accounts very hard. The State of California and most local government pensions were hard hit in the stock market crash of 2008. To make up the 34% loss to the stock market in 2008 CalPERS has raised retirement contributions for all public pensions by 6-15% per year depending on the exact retirement benefit.

Health Care: The cost of health care has been rising steadily for many years and is averaging about an 8 percent increase every year. This is not sustainable even in normal economic times because in normal years the Town adds about 3-5% per year in increased revenue.

What has the Town done to cut expenditures?

Many sacrifices by Town employees have already been made and more are needed.

Cost of living and other wage cuts: The Town runs a very tight ship (no frills), providing top notch police, fire, road work, park maintenance, planning, building inspection, code enforcement and other public services with smaller staff and wages that are below other salaries and benefits in Marin towns.


Wage Freezes and Vacant positions: Town staff have been on a wage freeze for three years, and currently have three key positions unfilled.

More wage cuts in FY 2011/12: The Town is beginning to negotiate with our bargaining units to give up even more compensation. New labor agreements will be in place this summer.

New Revenue Ideas: The Town has few revenue generating options. We have just raised our permitting fees to actually match what it costs the Town to perform the service.

Measure I: If this measure had not passed, we would have been in a really dire position and have to give up services that the public expects us to provide. The Town receives a small portion of property taxes (18%), which have been reduced through reassessments, while expenses go up. And we receive only 1% of the existing sales tax (about $330,000 per year) which has been declining for the last three years. The Town is trying to find ways to spread the burden around and not put it all on our residents and home owners. A sales tax is a small way to have people from outside Fairfax help foot the bill for the town they enjoy visiting and patronizing. We assume that merchants will not take this as a hit for themselves, but pass it on to their customers. One half of one penny on each dollar (about $150,000 per year and all going directly to the Town) seems easier to swallow than some of the other options that have come our way.

Public Input: If you have other ideas for generating $150,000-$200,000 each year, we are open to hear about it.

How can a local sales tax be used in Fairfax?

The local sales tax revenue generated could be used for general government services (such as police protection and services, recreation, youth and senior services planning, building inspection and public works maintenance activities) and for specific government services such as public infrastructure improvements and beautification projects. Infrastructure improvements include street maintenance and capital repairs, building maintenance and capital repairs, sidewalk, curb and gutter maintenance and replacement, and Town maintained landscaping.

A simple majority vote is required for approval of a general tax and a two-thirds vote is required for specific tax.


A local sales tax measure of one half cent would generate approximately $150,000 per year for the Town of Fairfax. A local sales tax measure of three quarters of one percent would generate approximately $225,000 per year and a one percent local sales tax would generate approximately $300,000 per year.