City Council Endorses Ballot Measure to Increase Sales Tax

The West Hollywood City Council voted last night in favor of a proposal to put on the Nov. 3 ballot a measure that would increase the city’s 9.5% sales tax by three-quarters of a percent.

If approved by a majority of voters, the new sales tax would by 10.25%, which is the maximum rate permitted under state law.

The increase is being requested by City Manager Paul Arevalo to help the city deal with the substantial impact that the COVID-19 pandemic is having on the city’s budget.

A memo from the City Manager estimates that city revenues were down by about $15 million in the fiscal year that ended on June 30. That represents a 15% decrease in revenue going into the city’s General Fund, which is the part of the budget used for the city’s core administrative and operational tasks.  The memo estimates that this fiscal year, whcih started July 1, the city will see a $20 million (15%) decline in revenue.

“These revenue declines are significant and severe, and have led to a reduction in contracted services, the furloughing city employees, the need to lay-off temporary city employees, the need to freeze the hiring process for vacant city staff positions, the need to secure new long- term debt to complete current capital projects, and the drawdown of city emergency reserves in order to make up for the revenue losses in FY20 and FY21,” says the memo. “At the same time, the city is seeing a greater need for many of the critical services that the city provides, such as social and senior services, the cleaning and upkeep of public areas, assistance in retaining businesses and jobs in the city who have been hard hit by the economic impacts for COVID-19, continued work to address homelessness, as well as ongoing measures to respond and recover from the coronavirus.”

The sales tax increase is projected to increase city revenues by $11 million a year. The city currently only receives revenue generated by one percent of the existing 9.5% sales tax. The remaining 8.5% is allocated to the state and county and to specific purposes dictated in other ballot measures such as Measure M (support for expansion of L.A. Metro) and Measure H (funding of county homeless services).  The memo notes that if another countywide measure were to be passed in the future, it would reduce the portion of the 10.25% maximum sales tax that goes specifically to the City of West Hollywood.

Thirty-one of the 88 cities in Los Angeles County have approved increases that put their local sales tax above 9.5%.  Cities such as Burbank, Culver City, Glendale, Long Beach, Pasadena, South Pasadena, and Santa Monica have approved increases that bring their sales tax to the maximum 10.25%.

As to the impact of the sales tax increase on local residents, the memo note that about two-thirds of the city’s sales tax revenue is generated by purchases in West Hollywood from tourists and visitors. It also notes that the sales tax is not applied to basics such as groceries and medications.

The City Council’s approval of the proposal means City Hall staff will bring back a specific ballot measure for the Council’s approval. Four of the five Council members must ultimately endorse that measure for it to be put on the ballot.