Thursday, May 29, 2014

Measure C - More costly than you may think

Some of our Mayoral and City Council candidates have described Hayward’s proposed sales tax increase as “nothing to cry about” and a mere “a drop in the bucket.” Apparently they view this tax as nothing more consequential than losing a few pennies from their pockets.

A more considered perspective would be to view the proposed increase from 9 to 9½-percent for what it really is:  a 5½-percent tax hike. And should the November county transportation sales tax measure also be successful, the move from 9½ to 10-percent (the highest rate in the state) will equal an additional 5-percent increase or an overall 11-percent increase of our sales tax in just 6-months.

Consider the ramification in the context of cumulative spending over time. Over the course of two decades (the duration of the proposed tax), a typical household will spend many tens of thousands of dollars on the purchase of taxable items, such as: vehicles, vehicle fuel, parts and supplies, home remodeling, home maintenance items and tools, appliances, furniture, TVs, computers, cell phones, clothing, toys, gifts, carbonated and alcoholic beverages, dining out, pet food and supplies, etcetera. All this adds up. The typical household will wind up spending hundreds, if not thousands, of dollars more in sales tax.

Also consider the consequences in the context of business operations. Hayward is fortunate to have a large commercial/industrial business sector that generates much of the city’s sales tax revenue. Many of these companies spend tens of thousands of dollars on materials and supplies every single year. And most of them are competing in a global market where every penny counts. Aside from decreasing the desirability of their products among California buyers, increasing our city’s sales tax discourages them from making any substantial business-to-business purchases in Hayward.

Don’t expect others to shop Hayward first either. Never mind those who will shop out-of-state retailers via the Internet. Consider those families in San Lorenzo who currently prefer to shop Hayward’s Costco, Home Depot, Macy’s, Kohl’s, etcetera over those very same stores located in San Leandro simply because Hayward’s sales tax is currently a quarter percent less than San Leandro’s. Such frugality might seem incredulous to some, but in the context of cumulative spending over time, the savings are measureable and obviously desired. And possibly more motivating to those who make this choice is the principle of supporting more efficient governance by voting with their wallets. Approving Measure C reverses this equation, as Hayward’s sales tax will wind up being a quarter-percent more than San Leandro’s. Hayward’s sales tax will also wind up being a half-percent more than Pleasanton’s and Newark’s, thereby putting retailers at Southland Mall at a disadvantage to those located at the popular Stoneridge Shopping Center and the increasingly attractive NewPark Mall.

Hayward building contractors competing with contractors that commute in from outside of the county are going to find themselves at a greater disadvantage as well. The sales tax rate in Modesto, for example, is only 7.625-percent. Should Hayward’s sales tax be 10-percent by the end of the year, contractors commuting with their supplies purchased from the Modesto area will have a 2.375-percent purchasing advantage on top of their already lower cost of doing business. And believe it or not, contractors are commuting into Hayward from as far away as Sacramento.

Finally, consider that the Measure C tax is just one of several we’ll be facing in short order. By the end of the year we can also expect the aforementioned transportation sales tax as well as other new taxes proposed by AC Transit and the Hayward Unified School District. Of these, Measure C will be the only one whose outcome will be decided solely by Hayward voters. This, in conjunction with the expectation that voter turnout will be abysmally low, means that your vote in this election will greatly influence the amount of future sales tax you pay in Hayward; so be sure to vote.

And when you do vote, should you find yourself wondering if Measure C represents anything more than a few pennies from your pocket, keep this incredible fact in mind: it will take nine-Billion pennies just to pay for the City’s promised library. It will take many more to deliver on the City’s other Measure C promises. Do you really have that much spare change?

Vote No on Measure C

PS: Measure C isn’t the last of the City’s intentions to raise taxes. According to its proposed budget for Fiscal Year 2015, the City is planning on increasing its business tax revenues by at least 10-percent through adjustments of its rates and business categories.

Thursday, May 1, 2014

Unabridged Argument Against Measure C

By now registered voters should have received their official Voter Information Pamphlet in the mail. It contains the argument I authored against Measure C. I'm somewhat surprised by this because an argument submitted by an individual voter, like myself, gets superseded by any submitted by an organized group or a governing authority. Apparently though, I was the only one who made an effort to challenge the measure; so mine are the words you'll read.

To make the argument, I repeatedly used questions as my rhetorical device. I did so believing that readers contemplating these questions would more strongly convince themselves of the absurdity of it all than I could with specific statements, given the 300-word limitation.

But now not being restricted to the number of words I can post, I figured I'd offer some additional thoughts congruent to those previous. The bold text below is that of my original argument printed in the pamphlet. The italicized words are my added thoughts. Feel free to include your own in the comment section that follows.

Why does the City believe it’s entitled to greater relief from the effects of the recession and future inflationary costs than its residents and businesses?

This single question could have been the extent of the argument, since I honestly couldn't conceive of a justifiable answer myself. After all, everyone faced hardships and cutbacks during the recession. Just as we're all now facing rising costs as the economy improves. What makes the City so special that it should be rewarded with bonus income for the next 20-years?

Having since heard our incumbent candidates speak in support of the tax, it appears that their agreed upon answer is this: the City is deserving because it has managed its finances responsibly while the state has robbed it blind. They repeat this so often; they've apparently convinced themselves it's true. But they haven't convinced me.

Yes, two decades ago, the state altered the traditional allocation of property tax revenue to include a shift of funding away from local governments and toward local schools. For the City, this essentially resulted in a permanent loss of several million dollars per year. While certainly unfortunate, undesirable, and not entirely inconsequential, it's not the source of the City's current woes. After more than 20-years, this overused excuse has become a bit long in the tooth. We've since approved Measure A which offsets the annual loss by several fold. And we've also approved Proposition 1A (2004) and Proposition 22 (2010) to protect city funds. 

The candidates also point to the State's dissolution of local redevelopment agencies as another source of the City's financial woes. The problem with this argument is that redevelopment money was never city money in the first place. The State granted cities an extra portion of property taxes collected in a particular project area to use in a very specific way. This investment by the State was to reverse urban blight, which would presumably lead to increased property values, thereby raising future property tax revenue. Some cities were apparently misusing program funds, and the program's overall effectiveness was called into question. In 2012, all redevelopment agencies were dissolved. While this too was unfortunate, undesirable, and not entirely inconsequential, it's also not the reason for the City's current budgetary concerns.

The current concerns are the direct result of an unfortunate misstep made by Hayward (and many other cities) when employee pension plans were greatly sweetened back in 2002. Now, as the saying goes, the chickens have come home to roost. The floundering Public Employees Retirement System has been requiring greater and greater contributions to remain solvent. As a consequence, the City is now predicting significant budget deficits in future years.

In 10-years the deficit may be as high as $23-million, according to a Measure C editorial published by the Oakland Tribune/Daily Review. The problem, as the editorial points out, is that the promises made by the City for how it will spend Measure C money do nothing to address any deficit. In fact, if you think it through, fulfilling the Measure C promises will actually exacerbate the situation. The editorial warns that the City may be employing a bait-and-switch tactic. While the editor apparently understands how illogical it is to approve this measure, the publication inexplicably supports it anyway. Go figure.

Why does the City contend that it has over half-a-billion dollars in unmet capital needsyet provides no reference to any document supporting this incredible claim? 

Because any organization seeking additional revenue will typically exaggerate its need. But it's rather incredible that any would do so by hundreds of millions of dollars beyond its own published documents. Then again, if no one of authority questions it, why not shoot for the moon?

Why does the City’s Capital Improvement Program list unfunded capital projects valued at $325M of which more than half this amount can be attributed to Caltrans interchange projects traditionally funded by federal, state, and regional sources?

Because if you're going to exaggerate a need for funds, there are few better projects to claim as your own than hugely expensive CalTrans projects, including...

  • I-880/Industrial Parkway Interchange  $43M
  • I-880/West A St Interchange  $27M
  • I-880/Whipple Rd Interchange  $13.5M
  • I-880/Winton Ave  $25M
  • Rt 92/Clawiter/Whitesell Interchange  $52M
  • Rt 92/Industrial Blvd Interchange  $6M

(Incidentally, most of these projects are also being sited by the County Transportation Commission as justification for another 1/2-percent sales tax measure in November, which the Council also unanimously supports.)

Why is the City proposing a $60M library that is 50-percent more costly than even the most expensive new Bay Area library built within the past decade?

Because the proposal is based on the unbridled wishes of passionate library enthusiasts. And, of course, this grand plan is embraced by staff who are understandably eager to work in a new facility that would rival and exceed those of even the most wealthy Bay Area communities.

How will the City afford to stock, staff, and otherwise operate this proposed three story facility that would be more than twice the size of the existing?

If the City is honest and accurate with its projections of increasing pension liabilities and resulting future deficits, it will not be able to afford it without yet another increase in taxes. Never-the-less, like many public boondoggles, proponents believe "if we build it, they will fund"--betting on the notion that if so much money is committed to construction and financing, a future commitment of additional operating funds will have to materialize. Perhaps it will someday. But if we're to take a lesson from the City of San Jose, we best not hold our breath while waiting. 

Why does the City believe that it’s managing its finances responsibly when the 20-highest compensated city employees in 2012 each received a quarter-of-a-million dollars or more in salary and benefits? Or when the top six received more than $300,000 in compensation—nearly six times Hayward’s median household income?

While everyone who lives, works and generally survives at the mercy of competitive free-market forces recognizes that this level of compensation is excessive, the City only compares itself to other local public organizations where such pay is not entirely unusual. Consequently, the City deems this to be perfectly responsible management. Never-mind the fact that many of these organizations are facing fiscal calamity.

Why hasn’t the city’s existing supplemental taxes (the emergency facilities tax and the 5.5-percent utility tax) accomplished what they were intended to do?

Because according to a 2012/13 Alameda County Grand Jury investigation, the City allocates the entirety of the Emergency Facilities Tax revenue toward paying down the construction debt on City Hall and the downtown Fire Station No. 1. This then leaves nothing for addressing current concerns at any other critical facilities. The grand jury determined this to be acceptable, since the emergency facilities tax is a general fund source that can be spent any way the City sees fit. Likewise, the utility tax is also a general fund source, so its revenue can be expended in any manner as well. And yes, Measure C would also be a general fund source.

These taxes for general discretionary spending always begin with the promise of addressing emergency/protection/safety issues, yet they always seem to fall short on delivery. See the pattern? Perpetuating public fear is an effective strategy for seeking additional future revenue.

Why is the City not concerned by the burden that this unprecedented combination of taxes will have on Hayward’s residents and businesses?

Because apparently City leaders don't feel personally burdened by these taxes. It then stands to reason that they can't appreciate why anyone else would.

Why is the City not concerned that this measure in combination with the possible augmentation of the county transportation sales tax will set Hayward’s sales tax rate at an even 10-percent?

Because even after climbing to what is currently the highest sales tax rate in the state, City leaders are confident that a handsome new library building will attract new business and more shoppers to Hayward.

Why does the City believe that its residents and businesses are an endless source of revenue?

Because we have historically shown that we are willing to be so by way of our collective apathy and acceptance.

In fact, if you oppose this tax, it is not merely enough to plan on voting no. You need to commit to ensuring that every Hayward voter you know votes no as well. Because if I'm the only one making the effort, then we're all going to be paying unnecessarily higher taxes in the future.


Because the City has analyzed it, strategized it, and figures it can.  Don't let it.

Vote No on Measure C