COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager

DATE:

July 19, 2010

BOARD MEETING DATE:

July 27, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Four-Fifths

TO:

Honorable Board of Supervisors

FROM:

David Boesch, County Manager

Michael P. Murphy, County Counsel

SUBJECT:

Imposition of a Retail Transactions (Sales) and Use Tax at the rate of one quarter cent in the County of San Mateo, for a period of five years, for general fund purposes.

RECOMMENDATION:

A. Adopt a resolution (1) proposing to the voters of San Mateo County a one-quarter cent retail transactions (sales) and use tax for general fund purposes for a period of five years in the County of San Mateo, and (2) calling an election for the purpose of submitting to the electors a proposition for the adoption of an ordinance to impose a one-quarter cent retail transactions (sales) and use tax for general county purposes for a period of five years in the County of San Mateo.

B. Adopt an ordinance imposing a one-quarter cent retail transactions (sales) and use tax for general fund purposes in the County of San Mateo for a period of five (5) years.

BACKGROUND:

At its meeting of June 29, 2010, this Board discussed levying a quarter cent sales tax within the County of San Mateo in order to raise revenues for general fund purposes. The Board heard a presentation by Godbe Research and accepted the Revenue Measure Feasibility Survey Results which indicated the prospects for passing a general sales tax at the November 2, 2010 general election. Godbe indicated that support for the tax was highest at an increment of one-quarter cent on the dollar (0.25 percent), for a period of five years. The estimated annual revenue from a countywide sales tax, at the minimum increment of one-quarter cent on the dollar, is approximately $30 million.

The Board determined to continue the matter to its meeting of July 27, 2010, and directed staff to prepare a resolution for the Board’s consideration, which would refer to the voters a proposal to levy a one-quarter cent sales tax for a period of five years.

DISCUSSION:

The California Revenue and Taxation Code vests counties with the authority to impose a transactions (sales) and use tax for general purposes at the rate of 0.25 percent or a multiple thereof. (Cal. Rev. & Tax Code §7285.) Such a tax would be applicable to transactions in both the incorporated and unincorporated areas of the County. Imposition of the tax requires two separate approvals: (1) referral to the voters, by resolution or ordinance, of the question of whether the tax should be imposed, which action must be taken no later than August 6, 2010, for the November 2, 2010 ballot, and (2) adoption of an ordinance by the Board levying the tax, which is not subject to the August 6, 2010 deadline, but which must be completed before a tax can actually be collected.

1.

The Board may submit the tax to the electorate either by resolution or ordinance under provisions of the Government Code and the Elections Code. In accordance with the Board’s previous direction, a resolution has been prepared calling an election, for November 2, 2010, on the question of whether the County should levy a one-quarter cent transaction and use tax for a period of five years. Proposition 218 (and related provisions of the California Government Code) provide that, because it is a general tax, a sales tax may be imposed only if it is approved by a majority vote of the County electorate in an election consolidated with a regularly scheduled general election for a member or members of the Board of Supervisors.

2.

As a separate and distinct action, the Board must itself adopt the ordinance which actually imposes the fee. There is no requirement that the ordinance be adopted prior to the referral of the question to the voters. We have prepared an ordinance for introduction by the Board which contains provisions identical in substance to the measure that would be placed before the voters. Pursuant to Cal. Rev & Tax Code § 7285, the Board must approve the ordinance by at least a two-thirds vote of all members of the Board before the tax may be levied (i.e., four votes).

If the measure is placed on the ballot by the Board, and is approved by the voters on November 2, 2010, staff will return to the Board for approval of a contract with the State for collection of the tax. By law, the earliest date that the tax can be collected is April 1, 2011. (Rev & Tax Code §7265.) If approved, the measure would result in the total sales tax in the County of San Mateo increasing from 9.25% to 9.50%, except in the City of San Mateo, where the total sales tax would increase from 9.50% to 9.75%.

Consideration of focus group and survey results as part of the decision-making process to bring potential revenue enhancement measures to the voters contributes to the shared vision of a Collaborative Community, where leaders inform and engage residents and approach issues with fiscal accountability and concern for future impacts.

FISCAL IMPACT:

Because there will already be a county-wide supervisorial race on the November ballot, the incremental cost of conducting the election is predicated on the number of measures on the ballot. Each measure is estimated at $250,000, which includes translation, printing, and mailing costs. This cost could be lower on a per measure basis if more measures are added to the November ballot. This amount would not be recoverable if the measure fails. Passage of the measure, and imposition of the tax, would result in additional revenues to the General Fund of approximately $30 million per year for a period of five years, less an amount accruing to the State for administration of the tax.