Burbank officials may turn to residents in November to see if they would support a sales tax that could pull the city out of its financial hole.
The City Council unanimously voted during a meeting on Tuesday to direct staff to draft ordinances to place a three-quarter-cent sales tax on the upcoming November ballot, as well as develop a civilian committee to oversee the use of the funds generated, should voters support the initiative.
Cindy Giraldo, the city’s financial services director, told council members that city staff members think going with a general-purpose sales tax would be the most effective way to address Burbank’s recurring deficit, which is expected to reach $9.5 million during the 2022-23 fiscal year.
She said the sales tax, if approved, is projected to generate about $20 million annually, which would supplement Burbank’s existing 9.5% sales tax that generates about $33 million each year.
The budget deficit was originally projected to be about $30.5 million — caused by increasing pension costs and a backlog of needed capital-improvement projects — if city officials had done nothing. Instead, the City Council took several steps to bring that figure down.
One of the main factors was the passage of Measure T during the statewide primary election earlier this month. That ballot measure, which allows the city to continue transferring up to 7% of Burbank Water and Power’s gross electric sales to the General Fund, was approved by more than 81% of local voters.
The city had been making the transfers since Burbank voters approved them in 1958.
The recent vote of approval resulted in the city maintaining the roughly $12.5 million in annual General Fund revenue from the city-owned utility, which helps pay for street-lighting maintenance and other city services.
Burbank was in jeopardy of losing that funding when Burbank resident Christopher Spencer sued the city in 2016, alleging that the transfer was illegal and violated Propositions 26 and 218, which aim to prevent hidden taxes.
In September 2017, Los Angeles Superior Court Judge Mary H. Strobel ruled in favor of Spencer and recommended city officials clarify the city’s charter to clearly state the practice had already gained voter approval.
In addition to the recurring $12.5 million Burbank will be receiving from the electric-sales transfer, the City Council approved several labor-cost-saving initiatives, which Giraldo said are expected to save the city $9 million annually.
Some of the policy changes include asking employees to pay half of their pension costs, adjusting employee compensation to the market rate and implementing a fee recovery schedule for city services.
Should Burbank voters approve a three-quarter-cent sales tax, maintain its electric sales transfers and continue its labor-cost-saving initiatives, Giraldo said the city would have about $11 million left over and could be used to address many projects that have been put on the back burner, such as infrastructure repairs, street paving and safety enhancements.
To ensure the money generated by the proposed sales tax is put to its intended use, Councilman Bob Frutos said it was important to have some type of civilian oversight committee.
Mayor Emily Gabel-Luddy said the funds should be audited on an annual basis.
City staff is expected to come back to the City Council during its July 17 meeting with the appropriate ordinances to place the sales tax measure on the November ballot.
The deadline to place a measure on the upcoming general election ballot is July 31, Giraldo said.
There is a sense of confidence among city staff that a sales tax would be supported and approved by voters.
Burbank contracted research firm Fairbank, Maslin, Maullin, Metz and Associates last year to poll residents on whether they would support a general-purpose sales tax measure if it was placed on the November ballot.
In late January, the firm reported to council members that out of the 2,635 Burbank voters polled in late 2017, about 69% said they would vote for a three-quarter-cent sales tax measure.
Though she said the data is a bit stale, Giraldo told City Council members the research firm is finishing up an updated survey, which is expected to be presented during the July 17 meeting.
Though council members went forward with a proposed sales tax measure, they were presented with several other revenue options that could be viable for the city.
Vice Mayor Sharon Springer and Councilman Jess Talamantes said they were interested in learning more about raising the city’s transient-occupancy tax for hotels, which is currently at 11%.
Giraldo said if the city were to up the tax to 12%, it is projected to generate about $1.2 million annually.
Gabel-Luddy and Talamantes asked staff to bring back more information on a possible cannabis business tax, which would be placed on marijuana sales.
California voters approved the recreational use of marijuana during the November 2016 election. However, Burbank has prohibited cannabis businesses from opening in the city.
In order for Burbank to consider a tax on such businesses, Giraldo said the city would need to change its policy on the issue.