To the shock of GUSD, council puts a stop on sales tax

“Shocked,” “surprised,” “stunned” and “disappointed” by an unexpected 4-2 vote cast Monday by City Council against placing a joint city-school sales tax on the November ballot, it’s “back to the drawing board” for Gilroy School Board trustees as they attempt to safeguard the district from a possible $8.1 million cut in state funding next year.
Following what City Councilman Bob Dillon says could have been a miscommunication between city and school officials, the Gilroy Unified School District Board of Education was more or less blindsided by the outcome.
Several GUSD trustees say the plan was for both groups to hold independent study sessions regarding a possible joint city-school sales tax, which could yield up to $11.5 million annually depending on a 0.25, 0.50 or 1 percent local sales tax increase. The two governing bodies were scheduled to meet July 17 and discuss the possible placement of the measure on the November 2012 ballot; the deadline for which is Aug. 10.
The agenda, which was posted Friday for Monday’s gathering, was defined as a “special meeting,” however, which gave City Council the right to vote on agenda items.
City Council voted 4-2 to put a halt to the sales tax proposal, with Mayor Al Pinheiro and City Council members Dillon, Dion Bracco and Cat Tucker casting “yes” votes. Councilman Peter Arellano and Peter Leroe-Munoz opposed the motion. Councilman Perry Woodward was absent.
Calling the vote “premature” and “short-sighted,” GUSD trustee Rhoda Bress said she was “shocked” and “disappointed” that “the process wasn’t honored as expected.” The school board was under the impression there was not going to be a vote Monday, she said.
The two subcommittees formed by the city and school district “hadn’t even met yet,” said Bress. “It was my understanding that this was going to be an issue that was studied. We thought the discussion was going to be continued.”
She said Monday’s vote “didn’t figure into the plan.”
Councilman Dillon said there were just too many legal questions surrounding the sales tax proposal.
“Only one city, Santa Monica, has enacted something like this, and they haven’t been sued yet,” Dillon said. “But there are a lot of areas that could open us up to lawsuits.”
Dillon believes that since Gilroy’s city budget relies on big-ticket sales, yet another sales tax increase mounted on top of a proposed county tax increase which will join a state sales tax increase measure on the November ballot.
“As taxation increases, demand falls,” Dillon said.
During the special meeting, Finance Director Christina Turner gave an hour-long presentation from city staff that made Council aware of several “legal issues” and “potential consequences” of allowing the sales tax on the ballot, such as how the sales tax could be consider a “gift of public funds,” which is illegal in the state, and the fact that school districts are not independent agencies, but agencies of the state, which has the authority to take money from one school district and transfer it to another.
“There is a possibility that the State would try to appropriate any money the City grants or otherwise conveys to the GUSD,” the staff report reads, a possibility that Dillon later said is “likely, given how our state grabs at money any chance they get these days.”
Seven people from the community showed up to speak about the tax during public comment, most of them railing against the proposal.
“It doesn’t sound like this is well-thought out yet,” a woman told Council.
Dillon agreed: With the Aug. 10 deadline to approve the final November ballot rapidly approaching, Council felt rushed to pass the proposal, which he said “hadn’t been fleshed out yet.”
Peter Leroe-Munoz implored fellow Councilmembers to approve the sales tax proposal.
“If we do not act now, there may not be much of a school district worth saving later,” Leroe-Munoz said.
While Leroe-Munoz agreed that blocking the proposed tax would keep Gilroy competitive for retailers, he wondered at what cost.
“One of the biggest considerations every one of them has is ‘Where can I raise a family with good schools?’” he said. “I think we all talk about the importance of education; this is an opportunity to show we care. Let’s put this in front of our voters and let’s let them decide.”
But the majority was convinced otherwise.
“I think it’s wrong, in this time, to ask people for more of their hard-earned money,” Councilman Bracco said, who called school district’s tax proposal “illegal.”
The sentiment among those who voted against the sales tax proposal is that it would be disingenuous to aim for 50 percent of voters in a general use tax increase only to funnel the money to the school district – instead of holding a special use tax proposal which would require a two-thirds vote.
“It’s a gimmick to funnel money to the school district,” Dillon said.
GUSD trustees must return to the drawing board
Trustee Jaime Rosso said he isn’t out to make the city “look like the bad guys.” He empathizes with City Council’s concerns for the time crunch on drafting the ballot measure language; questions regarding how the city would go about transferring the tax revenue to GUSD; and “too much uncertainty” surrounding this “groundbreaking,” “out-of-the-box” initiative to help fund Gilroy schools.
Still, Monday’s vote “totally caught us by surprise,” he admitted.
“We were really stunned,” said Rosso. “We didn’t anticipate that. If we thought that was the intent of the meeting, we certainly would have been there to make our case.”
Dillon, who was “a little surprised that the entire (school) board was not there,” said he wasn’t aware that GUSD trustees were “blindsided” because the agenda said “special meeting.”
With the majority of City Council feeling so “negative” about the sales, tax, Dillon explained “we thought we don’t need to waste any more time on this. It’s got ‘loser’ written all over it.”
The fact City Council didn’t follow through on the original plan to discuss the tax during a collaborative city-school meeting scheduled for July 14 “disappointed” trustee Pat Midtgaard and seems a little underhanded to trustee Mark Good.
“I can understand at the end of the day if the city did not want to move forward. They’re a governing board and they have to make the best decision they can for the people the represent,” said Good. However, “we’re both surprised and shocked, frankly, at City Council’s action. We were told it was a study session … the process was to talk about this thing, and it was not followed.”
Being as the agenda – made public several days ago– defines Monday’s gathering as a “special meeting” rather than a “study session,” the City Council had legal grounds to make and vote on motions.
While “what they did was lawful,” Good added, “it certainly was not in the spirit of any type of cooperation with helping the schools.”
He’s also disappointed that City Council is preventing Gilroy taxpayers from deciding on the measure.
“We didn’t ask City Council for a dime,” Good added. “We didn’t ask them to pay for the survey or the election or anything. All we asked them for was to put it before the voters. That’s it.”
In response to one recurring argument against the sales tax brought up again Monday by dealership owner Randy Scianna of See Grins RV – who stated during public comment that because people will drive long distances to save a quarter of a cent in sales tax, an increase would inevitably hurt Gilroy business– Good still can’t believe education is getting trumped.
“Reducing the amount of instructional days for our children” versus asking shoppers to pay a one-half or quarter-cent sales tax increase, “that’s just mind-boggling to me,” said Good.
Trustee Midtgaard, similarly, feels Gilroyans “should have a chance to vote.”
“We were all feeling very energized by the polling results, because those were in our favor,” she said, referring to a recent telephone survey that showed more than the needed 50 percent majority of 501 likely November 2012 Gilroy voters would strongly support a city sales tax for local schools.
“Now, I guess we can’t even get it to the voters,” resolved Midtgaard. “So the next step? Wow … I just can’t say at this point. There aren’t too many sources of revenue.”
Rosso said one option is for GUSD to revisit during its July 19 regular meeting the possibility of a parcel tax.
A flat rate or variable rate parcel tax – which require a two-thirds vote and will yield an annual $1 million or $2 million respectively – do not require approval from City Council to be placed on the November ballot. The Board of Education has the ability to put a parcel tax before voters.
Now that a sales tax is off the table, Bress agrees the parcel tax idea will likely be re-addressed. This measure won’t raise nearly enough money to mitigate a possible $8.1 million cut to GUSD’s state funding, though.
Based on previous polls conducted by the district in attempts to gauge support for a parcel tax, this type of measure “is dead on arrival” as far as trustee Good is concerned.
“There are no more options. There’s no drawing board to go back to,” he said. “This was the last-ditch, Hail Mary effort. We have an emergency in our education system and that’s why we’re addressing this.”
The district recently approved two instructional calendars for the 2012-2013 school year.
GUSD is faced with losing $2.9 million or $8.1 million in state funding in the 2012-2013 school year. This is contingent on whether voters pass Gov. Jerry Brown’s tax initiative in November 2012.
GUSD has prepared for these cuts by increasing class size ratios and implementing 10 furlough days for teachers and management staff in 2012-13. These 10 furlough days equate to a 5 percent pay cut, and break down into seven instructional days and three staff development days. If Brown’s tax initiative passes, GUSD will restore the 10 furlough days.
The burden of losing seven instructional school days will be “huge” for the city, Bress lamented.
The only two Councilman who seem to grasp this “bigger picture” are Peter Arellano and Peter Leroe-Munoz, she said.
Bress wishes the entire City Council had taken into consideration that “the quality of the city can only be as good as the quality of its education system.”