Board of Supervisors wants to raise sales tax

The county wants to raise the sales tax rate, and West Hollywood wants a piece of the profits.

The Los Angeles County Board of Supervisors is asking voters this November to replace Measure H, the quarter-cent sales tax passed to address homelessness which expires in October 2027, with a new half-cent sales tax that would not expire. The new tax would not be subject to the state limit on sales tax (10.25%), and West Hollywood would continue to receive a portion of what is collected.

“There is no time to waste,” Board Chair and former WeHo councilmember Lindsey Horvath told her colleagues, who joined her in unanimously approving the proposal. 

Because the new measure allows the county to keep what the city is currently getting, the city may ask voters to help them retain that portion — which amounts to about $5 million for the city’s general fund. City Council will decide Aug. 5 whether or not to include its own measure on the Nov. 5, 2024, ballot. The city ballot measure only goes into effect if the county’s measure passes and would not raise taxes on its own. 

The WeHo Chamber has publicly expressed opposition to the county’s effort to raise the sales tax.

Last month, the head of the Los Angeles County Business Federation said the county’s proposal — known as the “Affordable Housing, Homelessness Solutions and Prevention Now” measure — amounts to a “forever tax.”

While the city has not taken an official position on the county measure, City Manager David Wilson told business leaders this week he didn’t think voters would approve it in November.

Supporters of the measure announced last month that they had gathered over 410,000 petition signatures, surpassing the required 238,922. They believe the measure would generate approximately $1.2 billion annually, which would be allocated to building affordable housing, increasing access to mental health and substance abuse treatment, and enhancing accountability measures.

Under the proposed measure, 60% of the revenue would fund homelessness services, with 15% of that amount distributed to cities based on the annual homeless count. Additionally, 35.75% of the revenue would support the L.A. County Affordable Housing Solutions Agency, established by the state Legislature to oversee homelessness solutions.

The measure’s backers argue that lessons learned from Measure H will allow the new tax to be more effective. It includes provisions for audits and targets to ensure that funds are used efficiently to help people transition off the streets.

While Supervisor Horvath touted the successes of Measure H, noting that it prevented over 30,000 people from becoming homeless and placed more than 100,000 in permanent housing, the initiative has faced significant challenges and criticisms.

Reports indicate that nearly $1 million was spent on the campaign to pass the measure, raising concerns about the ethical use of taxpayer money. Bureaucratic inefficiencies have led to delays in fund distribution, and significant amounts of money have remained unspent, which undermines the measure’s intended impact on homelessness reduction. The number of people becoming homeless for the first time has increased, outpacing the measure’s capacity to provide support. The collaboration between Measure H and Proposition HHH, which focuses on building housing for the chronically homeless, has not achieved the rapid relief that was promised. This has resulted in a persistent increase in the overall homelessness rates in LA County.

The California Policy Lab’s evaluation highlighted inefficiencies in the implementation of homelessness prevention strategies funded by Measure H. The report noted that while some services were effective, the overall prevention programs were not sufficiently reducing the inflows into homelessness. The complexity of the Prevention Targeting Tool, used to determine eligibility for services, was also criticized for needing improvements to be more accurate and efficient.

The business community in Los Angeles continues to face major obstacles, particularly the persistent economic uncertainty and inflation. Businesses are grappling with higher costs for goods and services, which have squeezed profit margins and made it difficult to maintain stable pricing for consumers. This inflationary pressure has been exacerbated by supply chain disruptions and increased demand post-pandemic, leading to higher operational costs​.

Recent increases in the minimum, while beneficial for workers, have posed significant challenges for businesses in the area.  The implementation of a $20 minimum wage for fast-food workers led to a notable reduction in jobs. For example, between the fall of 2023 and early 2024, nearly 10,000 fast-food jobs were lost in California. This job reduction represents a 1.3 percent decrease, indicating that higher wages are causing some businesses to cut jobs to manage increased labor costs​, according to the Hoover Institution.

Businesses are experiencing higher operational costs due to the wage hikes. Sectors like food services, retail, and healthcare have been particularly impacted. These costs are often passed on to consumers in the form of higher prices, which can reduce consumer demand and further strain business revenues.

Small businesses, which constitute a significant portion of the Los Angeles economy, are struggling more than larger firms. These businesses often operate on thinner margins and have less flexibility to absorb increased labor costs. The increased wage requirements have led to reduced hiring, cutbacks in employee hours, or even business closures in extreme cases. Los Angeles County has seen approximately 15,000 businesses shut down since the pandemic began.