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Noozhawk » Goleta Raises Stakes with County on Taxes

Goleta Raises Stakes with County on Taxes

By Sonia Fernandez, Noozhawk Staff Writer | Posted on 06.19.2008

[Editor’s note: The Goleta City Council voted to consider putting two tax measures on the November ballot. An earlier version of this story was incorrect and has been corrected below.]

Tuesday was a day of bold moves for the city of Goleta, as council members voted to consider putting two measures on November’s ballot — measures that if passed, would have far-reaching consequences for Santa Barbara County. Both measures are part of an effort to offset the effects of the city’s revenue neutrality agreement with the county and projected budget deficits.

First, the council voted 3-2 — with Mayor Michael Bennett and Council members Jean Blois and Eric Onnen in the majority and Council members Roger Aceves and Jonny Wallis dissenting — to consider putting on the ballot an initiative that would, if passed, allow the city to unilaterally amend its revenue neutrality agreement with the county.

Goleta’s RNA, which took effect when the city incorporated in 2002, is one of the first such agreements and is often deemed to be the worst in California because it shares up to half of its revenues with the county, whereas other cities with such agreements share around 10 percent.

Goleta officials have been in talks with the county to renegotiate the agreement, but are so far apparently dissatisfied with the cash-strapped county’s offer to forgive the $1.5 million loaned to the city for startup purposes, preferring instead to give Goleta voters a chance to decide whether the city should change the terms of its agreement with the county.

“The voters giveth, and the voters taketh away,” Bennett said.

Wallis, however, cautioned the supporters of the measure, saying that amending the RNA would amount to reneging on terms that were part of the contract between city and county that allowed Goleta to incorporate, a move that would more than likely lead to litigation by the county.

“We do have alternatives,” she said. “We have the ordinary remedies of contract law. Once an agreement is so far out of step with its original intention, contract law allows you to come back.”

Goleta has exceeded its projected earnings over the years and, as a result, has shared more revenue with the county than expected over the same period. As the city projects a poor financial outlook for the next few years, it will also have surpassed the projected earnings it was to have shared with the county by millions of dollars.

Nevertheless, Bennett, Blois and Onnen voted to consider the measure despite little legal history in this area that has proven the effectiveness of an initiative to repeal the terms of an RNA.

“We’re saying that we will not stop addressing the revenue neutrality agreement till we have exhausted every single opportunity to correct it,” Onnen said. “The revenue neutrality agreement is improper.”

If the measure passes, the county could be looking at an even tighter budget and millions less in revenue in coming years.

Shortly after the vote to put an initiative on the ballot amending the RNA, the council voted 3-2 — again, with the same breakdown — to propose its own Goleta sales tax initiative for the November ballot, a poison-pill strategy that could endanger, if not derail, Measure A, the half-cent county-wide transportation sales tax meant to continue the current Measure D, which ends in 2010.

‘It clearly positions the interests of Goleta against the interests of the county,” Mike Madrid, strategic consultant to the city, said of both the RNA ballot measure and the Goleta sales tax measure. While a strong move politically, he said, the gambit would only be effective depending on Goleta’s ability to deliver on the “threat” of allowing the voters to impose that alternative sales tax on themselves.

Depending on further deliberations and opinion polls, the council may choose to word the initiative so that the sales tax — currently set for a half-cent over 30 years — competes with Measure A, in effect giving voters a choice between Measure A and the competing Goleta sales tax, or the option of having both.

But while Measure A needs a two-thirds vote, the Goleta sales tax would only need a simple majority. In theory, Goleta voters may prefer this tax over Measure A, because the funds go directly back to the city, while under Measure A, the city would get back less than half of the funds it contributes. This competing measure, as well as another state-sponsored temporary sales tax scheduled for the November ballot, could take enough votes away from Measure A that it could fail at the polls.

Alternatively, the city, which has been supportive of Measure A, could word its sales tax measure so it would act as a replacement sales tax when the current Measure D ends in April 2010, or if Measure A fails at the polls. The tax revenue from the Goleta sales tax would not necessarily be earmarked for transportation-related projects, however.

“There’s never a good time for a tax increase, but I think this a really awful time,” said Wallis, pushing for a more conservative strategy of using reserves and tightening the city’s spending.

“I feel strongly that the only reason the county ever agreed to sit down with us is because they were informed that there was a possibility that we would have our own sales tax,” Blois said. “We are a young city and on the level of things in the county, we’re near the bottom ... The county is so all-powerful that they don’t want to listen to anything we have to say. And I think the only way we can keep their attention going is to have a sales tax initiative on the ballot.” Furthermore, she said, Goleta would need a backup sales tax measure to compensate for a failed Measure A.

The two ballot measures will come up again for discussion and approval on July 1 at the next Goleta City Council meeting. If approved, city staff will submit the measures for placement on the November ballot by July 3.

Noozhawk staff writer Sonia Fernandez can be reached at sfernandez@noozhawk.com.

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