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Voters to Decide Guadalupe’s Future with Tax Increase Measures in Tuesday’s Election

Cash-strapped city may have to consider disincorporating if residents don't support initiatives to change the sales tax, business license fee and utility tax

With Guadalupe voters being asked to approve three measures aimed at keeping the financially-ailing city solvent, Santa Barbara County officials will be watching the outcome closely.

“I think everyone’s waiting for the results of (Tuesday’s) election to see what the next steps will be,” said Mona Miyasoto, chief executive officer for Santa Barbara County.

Many agencies have bond and other measures on Tuesday’s ballot, but none carry the weight of the three before Guadalupe’s voters, City Administrator Andrew Carter said.

“All will be in better places, but if they don’t pass, none of them risk going out of business,” Carter said.

Supporters of the measures have said Guadalupe would need to take the rare step to disincorporate if voters don’t approve the new revenue the measures would generate.

County officials have undertaken some initial research into the process but Miyasoto said they didn’t want to influence the outcome of the election.

Depending on the outcome of Tuesday’s vote, she plans to present a report to the county Board of Supervisors in early December.

“There’s no happy story for them,” she said.

Disincorporation requires a lengthy process involving the Local Agency Formation Commission and voter approval.

The three initiatives Guadalupe has on the ballot — Measures V, W and X — will generate revenue for the cash-strapped city, which came up short in its budget after Carter discovered earlier this year that the city had used questionable practices to make ends meet.

But Guadalupe has never been wealthy, partially because of a weak sales tax revenue — typically a key funding source for cities. 

Redevelopment Agency funding also helped in the past, but that money dried up with the state’s decision to eliminate those agencies.

“I think they are just an underfunded city,” County Auditor-Controller Bob Geis said.

Measure V would remove the $2,250 annual cap on Guadalupe’s utility users tax, which will remain at 5 percent. This tax is charged on water, electricity, natural gas and telephone services.

The current cap only benefits businesses spending more than $45,000 a year in utilities. Removing the cap would only affect one company in town and would generate another $100,000 per year for the city. 

Measure W would replace the current business license fee with a gross receipts tax. The current fee, last changed in 1979, charges $60, $90 or $120 per year.

The proposal is to charge businesses 50 cents per $1,000 of revenue. For instance, a $1 million business would pay $500 a year. The minimum rate would be $100 for home-based business or those without an address, such as out-of-town building contractors.

A business based in Guadalupe would pay at least $200. This measure would generate an additional $150,000 per year in revenue.

Measure X would add a sales tax hike of 0.25 percent so Guadalupe’s rate of 8 percent would climb to 8.25 percent, matching Santa Maria’s. If this passes, it would generate approximately $62,500 per year in revenue.

Each measure needs voter approval of more than 50 percent to pass. 

Carter said the city has already trimmed its budget severely, so new revenue is the limited option for helping the city.

“We really can’t cut our way out of this,” he said.

One idea proved not viable. Public Safety Director Gary Hoving researched whether the city could save money if it contracted with the Santa Barbara County Sheriff’s Department.

However, contracting with the Sheriff’s Department for law enforcement services would cost $2.1 million with one patrol car available in the city that's able to redeploy elsewhere if needed. 

By contrast, the Guadalupe Police Department’s current staff of two officers on duty at all times in the city costs $1.4 million per year.

Hoving didn’t contact the County Fire Department, recognizing the full-time staffing would cost much more than the current system Guadalupe uses with paid-call firefighters, adding up to a cost of $354,000.

“It should be clear that contracted public safety services will not save money and will have a negative impact on the community,” Hoving said. 

Other cities in this situation have explored filing bankruptcy, but Carter doesn’t see that as a option for the Guadalupe since it doesn’t have a huge amount of debt. 

“Really, the only other solution is we have to go out of business,” Carter added.

Noozhawk North County editor Janene Scully can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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