The Tax Issue

Dear Friends,

Nobody likes taxes. Whether it's the additional line item for sales tax at the bottom of your receipt, or the giant property tax bill you pay twice a year - taxes are not fun. Yet from roads to parks we all use public services everyday. Moreover, in disasters we expect our government to show up when nobody else will.

So, given that Property Taxes are due Dec. 11th; and that both the City and County of Santa Cruz are proposing new sales taxes for the March 5th ballot; and that Live Oak and Soquel residents will get a special ballot for streetscape maintenance; it seems best to address this unsavory topic head on.

The purpose of this discussion is not to advocate for or against any particular tax measure, but only to answer frequently asked questions and clear up common misconceptions.

Sincerely yours,

Manu Koenig

1st District Supervisor

Board of Supervisors Agenda Highlights

Photo: People checking out at a Home Depot. Home Depot on 41st Ave is one of the top generators of sales tax revenue for the County. Credit: NY Times

Item 9. Consider adopting resolutions calling for a special election on March 5, 2024, for a countywide measure to increase the unincorporated area sales tax by one-half cent and establishing budget priorities if the sales tax measure passes...

If the Board adopts this resolution, a question will be placed on your March 5th, 2024 ballot that would read as follows:

To fund essential Santa Cruz County services, including wildfire response/prevention/recovery; affordable housing to support working families and frontline workers including nurses, emergency responders, and educators; mental health crisis programs for children/vulnerable populations; substance abuse programs; improved public safety, road maintenance/pothole repair, parks/recreation; and programs to reduce homelessness, shall Santa Cruz County’s transaction and use tax (sales tax) be increased in unincorporated areas by one-half cent, providing approximately $10,000,000 annually, until ended by voters?

YES___ NO____

This would be a general tax, meaning that it needs just over 50% approval to pass. However, the Board of Supervisors is also considering adopting the following list of budget priorities for how the County would spend the estimated $10 million in annual revenues:

Housing and Essential Workforce Retention - $1.0 million
Countywide Homeless Services - $1.0 million
Climate Resiliency and County Parks - $1.0 million
Road Repair and Infrastructure Projects - $1.0 million
Other Essential County Services - Based on actual revenues

Now let's get into a few FAQs...

1. When would I pay this tax?

The County sales tax would only apply in the unincorporated area (see the green area on the map below) when you are shopping at a business or ordering something online. The cities of Santa Cruz, Scotts Valley, Capitola and Watsonville all have their own tax rates. In fact, the County sales tax is currently tied with Capitola for the lowest rate in the region.

Image: Map showing the current sales tax rates within the County of Santa Cruz. The proposed increase in the unincorporated county would apply to the unincorporated area (in green) and bring the rate to 9.50%. The City of Santa Cruz has proposed its own measure for the March ballot to increase its rate to 9.75%.

To be more specific, you're likely to pay county sales tax when you shop at the top businesses in the unincorporated area below:

76

AJ's Chevron Mart & Car Wash

Best Buy

Big Creek Lumber

Boulder Creek American

Felton Chevron

Felton Valero

Home Depot

Kind Peoples

Marshalls

Ocean Honda

Palace Art & Office Supply

Pet Pals

Probuild

Safeway (on 41st and in Aptos)

Safeway Fuel (on 41st and in Aptos)

2. Aren't Santa Cruz County's sales tax rates already among the highest in the State?

Not exactly. The State maintains a list of the sales tax rates across all 1,788 census-designated areas in California. You can find the list here. At 9.00%, the unincorporated County of Santa Cruz is currently in the top 24% of the state. If this new measure passed, it would be in the top 17%.

The top taxing jurisdictions are in Los Angeles and Alameda counties, where the sales taxes are as high as 10.75%.

3. Sales taxes generate more revenue when inflation increases, so why aren't the existing sales taxes sufficient? Why does the County need to pass a new one?

The County is paying for more services for more people than ever before. Just look at the Board of Supervisors' agenda:

Item 38. concerns the implementation of SB 43, a state law that expands the definition of "grave disability" to include people with a severe substance use disorder, creating a new pathway to conservatorship for these individuals. This law effectively mandates expansion of County responsibilities with no additional State or Federal funding,

Items 40. and 41. provide updates on emergency repairs to county infrastructure in last winter's storms. FEMA has promised to help pay for the over 200 damaged sites, but we are still waiting for the money to show up. We're still waiting for nearly $150 million in reimbursement from FEMA for the CZU fires, COVID-19 shelters, and the 2023 storms. The costs of the Climate Crisis have arrived, and the County is shouldering the costs.

Moreover, the County's costs are driven by salaries, and housing costs drive the need for higher salaries. Our community has been very resistant to building housing over recent decades: since 1980, the County's population has increased by 80,000 people, but only 26,000 housing units have been added. Scarce housing means higher home values for current property owners, but it also means higher costs to provide services. As the most expensive rental market in the country, Santa Cruz County government must offer higher wages to fill positions.

In summary, an increase in the unincorporated county's sales tax will bring it inline with the incorporated cities and provide resources to address increasing demands. This alone will not solve all our big problems (see a discussion of property taxes below), but it is the most immediate way to improve services.

Photo of the median on Capitola Rd between Soquel Ave and 7th Ave. Maintenance for these areas is paid for by County Service Area 9E.

Item 39. Accept and approve Engineer's Report for proposed increased assessment rates for streetscape services in County Service Area (CSA) 9E adopt resolution setting the public hearing for January 30, 2024 ...

There are some parts of the County budget that provide special services to one specific region. These are called County Service Areas (CSAs) and they are managed as separate accounts since not everyone in the County benefits from them. For example, CSA 48 pays for fire service in the rural, unincorporated area, CSA 3 pays for median maintenance and beach access in the Aptos Seascape area, and CSA 9E pays for streetscape and sidewalk maintenance in Live Oak and Soquel.

My office received a lot of complaints last summer about the unkempt medians throughout the Live Oak and Soquel area (pictured above). Maintenance has suffered because the assessment for this area is not pegged to inflation. It has been the same for the last 26 years: single-family homes pay $3.08 per year into the fund and multi-family properties pay $1.85.

Image: a map of CSA 9E. The area includes approximately 25 miles of sidewalks and 1,600 street trees.

Due to inflation, the purchasing power of these contributions has fallen to just 53% of what it was in 1997. Meanwhile, the 1,600 street trees in the area have grown and need more maintenance, while the sidewalks are older and require leveling.

If the Board of Supervisors approves this item tomorrow, a special ballot will be sent to every property in CSA 9E (see the pink area on the map above). The ballot will ask for an increase to $7.73 per single-family home (once per year) and between $1.93 and $5.80 for multi-family units (larger properties with more units would pay less). The largest change proposed is for commercial parcels, which would increase to $46.37 per year. This vote would also peg the rate to inflation so that a special ballot like this is not needed again in the future.

If approved, this would add over $90,000 per year for maintenance throughout the Live Oak and Soquel areas. Please watch out for this special ballot in the next month.

To view and comment on the full Board of Supervisors agenda click here: https://santacruzcountyca.iqm2.com/Citizens/detail_meeting.aspx?ID=1992

Property Taxes - What You Pay, Where it Goes and a Petition for Change

If you're lucky enough to own property in Santa Cruz County, your property taxes are due by December 11th. When making out your check for thousands of dollars, it's easy to wonder why the County's streets are not paved with gold. The simple answer: all that money isnt actually going to the County.

The County acts as the processor for your property taxes but keeps only 13.5% for the County General Fund. The lions share, 57% goes to schools, 10% goes to special districts, and 5% goes to the cities see graph below.

The County's share of 13.5% is one of the lowest property tax rates received by any county in the state. Estimates are that Santa Cruz County is 50th out of 58 counties in the share of taxes received. The average share for counties statewide is 20%.

A California state law determines how property taxes are divided. This state formula went into effect after the passage of Proposition 13 in 1978. It was not kind to Santa Cruz County. Forty-five years of chronic underfunding has taken its toll on our county's infrastructure. County roads are falling apart with close to $1B in deferred maintenance, and County General Services calculates that there’s $130M in additional deferred maintenance on county buildings as well as over $200M in deferred maintenance at County Parks.

That's why I worked with Supervisor Friend to introduce a resolution calling for “our representatives in the State Legislature do everything possible to change state property tax apportionment law.” The resolution was approved by the Board of Supervisors on Oct. 17th. You can read more about it here.

Luckily we have a dream team in the state legislature right now: State Senator Laird, Speaker Robert Rivas, Assemblymembers Gayle Pellerin and Dawn Addis. There has never been a better time to address this chronic problem.

If you'd like to add your voice calling for change consider signing the petition:

SIGN THE PETITION

County Road Work Updates

Photo: A view of the new bridge being constructed on Main St over Bates Creek in Soquel. The creek is being redirected through the black pipe during construction.

It is hard not to notice all the road work going on throughout the County! Whether it be city, county, or Caltrans work, no doubt you have found yourself in traffic. My office will continue to provide you updates on the latest road work. However, you can also sign up for the County's Community Development and Infrastructure Department newsletter here, so you can receive Road Impact Notifications the moment they are released.

Spring of 2024 is the planned start date for the Murray Street Bridge Seismic Retrofit which is anticipated to be a 2-year project. You can bookmark the website to keep an eye the project's start date and progress.

County Roads

Main St

We are projecting final completion to be the end of January. Currently the second phase/second half of the box culvert is being constructed. That portion of work will be complete in the next few weeks. Once that occurs we will be very well prepared for any large storm events that may come and only stream & roadway restoration work will remain.

Caltrans

Hwy 1

Construction continues on north and southbound auxiliary lanes and bus-on-shoulder improvements on Highway 1 between the 41st Avenue and Soquel Drive interchanges and to construct a new bicycle and pedestrian overcrossing at Chanticleer Avenue

For Monday Dec. 11 and Tuesday Dec. 12, travelers will encounter a full overnight closure of northbound Hwy. 1 at 41^st Ave. from 10 pm to 4:30 am. A detour is available. Travelers can expect delays of up to 10 minutes. One lane of southbound Hwy 1 may also be closed from 9 pm to 6 am.

This full overnight closure of Hwy. 1 is necessary for crews to construct the working platform from which the new bicycle and pedestrian bridge overcrossing will be constructed. Over two nights, crews will construct the platform, or falsework, out of timber and steel beams which will be utilized to stage the next phase of bridge construction.

Hwy 9

Work on long-term slope repairs at two locations on Hwy. 9 between Santa Cruz and Felton will result in overnight closures of Hwy. 9.

Beginning Monday Dec. 4, travelers will encounter a full closure of Hwy. 9, from 8 pm to 6 am, at two locations currently operating under a temporary signal system and one-way traffic control.

The first closure location is one mile north of the Hwy. 9 intersection with Hwy. 1 and one-half mile north of Vernon St. The second location is at the Sidehill Viaduct, in Henry Cowell State Park and .75 miles south of Glengarry Road. Overnight closures will alternate between these two locations and closures will not take place at the two locations at the same time.

Overnight closures will take place Monday Dec. 4, from 8 pm to 6 am, and continue through Thursday night Dec. 7. Once crews complete work at 6 am on Friday Dec. 8, there will be no overnight closures Friday through Sunday.

A detour is available using Graham Hill Rd. Travelers can expect delays of up to 15 minutes. Message and directional signs are in place to alert travelers of these closures.

During these overnight closures crews will remove K-rail barriers currently in place and establish final road grades in advance of final paving. These overnight closures are subject to change in the event of unfavorable weather.

Upcoming Meetings & Office Hours

Photo: Happy Valley Elementary School Logo

Tuesday, December 5th - Board of Supervisors Meeting starting at 9 AM

The agenda is found here. The meeting will be held via Zoom and in person at the Board Chambers at 701 Ocean Street, Rm 525.

Wednesday, December 6th - Office Hours. From 1 PM to 3 PM. at the First District Office at the Sheriff's Center, 5200 Soquel Ave, ground floor.

Bring your questions and we will meet one-on-one. First come, first served.

If you would like to schedule an appointment for another day and time, contact our office at first.district@santacruzcountyca.gov.

Tuesday, December 12th - Board of Supervisors Meeting starting at 9 AM

The agenda is pending. The meeting will be held via Zoom and in person at the Board Chambers at 701 Ocean Street, Rm 525.

Thursday, December 14th - Happy Valley Town Hall From 6 PM to 7:30 PM at the Sheriff's Office Community Room, 5200 Soquel Ave, ground floor. I will join the Sheriff's office along with Animal Services and the Human Services Department for this in-person town hall.

Location: Happy Valley Elementary School, 3125 Branciforte Dr., Santa Cruz, CA 95065 and on Zoom.

Join Zoom Meeting:
https://us06web.zoom.us/j/96708318897
Meeting ID: 967 0831 8897

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