Council to put sales tax hike to voters in June

Everyone said they didn’t like the idea, but they did it anyway.

Five members of the City Council voted unanimously Tuesday to call a June 7 special election proposing a half-cent sales tax hike on city transactions. If voters approve the measure with a simple majority, Richmond would be one of just a handful of cities statewide to have a sales tax rate above 10 percent.

A City Council staff report projects that Richmond faces a $4 million deficit in fiscal year 2011-12 without new revenues. Raising the sales tax from 9.75 percent to 10.25 percent could raise $6 million annually, according to the report.  

The ballot measure proposal includes an advisory provision calling for half of the tax’s proceeds to go to the local school district, and half to shoring up services targeting the city’s poorer residents. Richmond already provides more than $1 million annually to the school district, making it one of the few cities in the state to voluntarily subsidize its school district.

One by one, councilmembers and Mayor Gayle McLaughlin addressed a packed council chamber, each laboring to explain their ambivalence about asking their poor and working class constituents to shoulder a greater burden.

“I’m not a real happy camper tonight,” said Councilman Corky Booze, “because I don’t like taxes on my people.”

McLaughlin said she “really struggled” with her decision to support the tax. Councilman Jim Rogers, who teamed with Councilman Jeff Ritterman to write and propose the resolution to the full council, estimated that the tax increase would amount to “2 to 3 cents” per day for Richmond’s poorer residents, which he conceded could “add up pretty quickly.” Ritterman said federal and state tax rules had concentrated wealth among the elite, and Jovanka Beckles grimaced as she explained her reluctant support.

“It’s why we’re being forced to tax you more,” Ritterman said.

But in their resolution, Rogers and Ritterman wrote that the burden will be worth the benefits, and noted that some of the proceeds will come from out-of-town shoppers.

“Over 20 percent of the proceeds are from business to business sales. Items that low income people spend the lion’s share of their money on (e.g., rent, food, medicine) are exempt,” the resolution read. “The great majority of sales tax proceeds comes from large retail on the I-80 corridor, which is mainly non-Richmond consumers and is often expensive items.”

In discussing perhaps its most controversial vote since the November election installed new members Booze and Beckles, the council faced a starkly divided public during Tuesday’s meeting. More than a dozen people addressed the council publicly regarding the ballot measure.

Some, including a handful of local teachers and principals, praised the council for its willingness to dig deeper for local schools. Others complained that the council’s approach was misguided and that sales taxes place a disproportionate burden on the same poor families that the measure aims at helping, or lambasted the councilmembers for taking what they regarded as a wrong approach in addressing a fiscal crisis deepened in part by the national financial meltdown in 2008-9. 

“Wall Street does the crime, and we are asked to do the time,” said Charles Smith, a longtime resident. “This is a regressive tax.”

Other residents pointed to the jobless rate in Richmond, which stands at about 18 percent, and wondered whether a rise in the sales tax would push business elsewhere.

“This is going to hurt everyone in Richmond, it just worsens the problem,” said Joe Bako, president of the Country Club Vista Neighborhood Council, which represents one of the city’s more affluent neighborhoods. “A better solution to our fiscal problems would be to be more proactive with grants and other efforts to draw new money into our city.”

Mike Parker, a resident and supporter of the tax, said that while sacrifice is necessary in the short term, long term solutions will require reform of tax systems at the state and federal level.

“This is a regressive tax, it’s true,” Parker said. “And that’s a bitter pill to swallow.”

 After more than an hour of discussion, the council cast the unanimous vote in favor of putting the tax on a ballot. Councilman Nat Bates was absent. Councilman Tom Butt, who owns business interests in the city, recused himself from the vote. 

The city will have to pay about $200,000 to conduct the special election to pass or reject the tax on June 7, unless the state opts to hold its own special election.