Out-of-city tax rebate voted down by council

Laguna Beach residents who buy big-ticket items outside of the city will not get a rebate on the local Measure A sales tax they pay on the purchase.

The voter-approved half-cent sales tax does not just apply to purchases made in Laguna Beach; it also applies to some purchases made outside the city, including the purchase of vehicles or boats, and to outside catalog orders.

The tax has yielded $600,000 in the first quarter, July 1 through Sept. 30, 2006, more than city officials anticipated.

Concerned that many voters were not aware that the tax could apply to out-of-town purchases, city staff proposed that residents get a rebate on the tax paid on out-of-city purchases when it exceeded $50.

The City Council disagreed.

The council voted 4-1 Tuesday against the rebate proposal — as recommended by the Measure A Oversight Committee majority.

“I agree with the committee,” said Anne Johnson, who served on the committee that successfully campaigned for the passage of the half-cent tax to offset the city’s financial strain of dealing with the Bluebird Canyon landslide and its aftermath.

The rebate on out-of-town purchases would penalize Laguna businesses, Johnson said, whose sales would continue to be taxed.

“Why would folks buy big ticket items in Laguna if they can save significant dollars by shopping elsewhere?” Johnson said.

Based on the $600,000 tax revenue generated in the first quarter of the fiscal year, City Manager Ken Frank has projected an annual revenue stream of about $2.3 million, well above earlier projections of $1.7 million annually.

No one from the public spoke in favor of the rebate.

“A $50 rebate on a car purchase wouldn’t buy the air in the tires,” said Laguna Beach Taxpayers Association President and Republican Club member Martha Lydick.

She joked that her agreement with Democratic Club member Johnson’s position would trigger an earthquake.

Lydick declined to take responsibility for the thunder and lightning storm that doused the power city-wide later that night.

Realtor Bobbi Cox also supported the oversight committee’s position.

“One of the reasons I was so in favor of Measure A was because it showed the world we could take care of ourselves without handouts,” Cox said. “I bought a very expensive car in December. The first thing they asked me was my zip code. I paid the tax — a lot of it. But I knew where it was going — I voted for it. “

South Laguna resident Tracy Klug also opposed the rebate.

City staff supported the rebate proposal because residents were mistakenly led to believe that the sales tax would apply only to in-town purchases, which was the understanding of city officials.

“My intention was [that] people who bought a car out of town wouldn’t pay the sales tax,” said Mayor Toni Iseman, who favored the rebate. “A deal is a deal.”

Iseman said framers of the tax referendum were surprised to find the state had other arrangements.

Voters approved the tax in a special election held in December 2005 as a funding mechanism to rebuild the infrastructure in Bluebird Canyon, which was devastated by a landslide in June of that year and to develop a Disaster Fund so the city would never again have to scramble for money in an emergency.

The tax has an automatic six-year sunset, but may be retired earlier by a vote of the council.