Sentinel staff report–
Supporters and opponents of the controversial Measure M sales tax proposed in Citrus Heights have each made conflicting claims regarding the estimated cost per household that the 1% extra sales tax would incur.
Tim Schaefer, a current planning commissioner and opponent of Measure M, recently claimed in a Facebook post that the cost of Measure M for households would equal around $367 per year, while Vice Mayor Steve Miller replied that “the average cost to households would be less than $60/year.”
Each used data showing roughly 34,000 households in Citrus Heights and a figure of $12 million that the city anticipates would be generated annually from Measure M, if passed by voters on Nov. 3. But each came up with significantly different numbers.
So what does the data show the actual cost to residents would be? We asked former CSUS business professor Terence Pitre, who earned his Ph.D. in accounting, to provide an independent assessment of the claims.
Pitre, who now serves as department chair at Bowling Green State University’s college of business, said it’s hard to say due to some unknown factors, but he pointed out oversights made by each side.
One oversight made by Schaefer was to not account for the fact that non-residents shop in Citrus Heights and would contribute to the estimated $12 million in sales tax to be generated by Measure M. According to Schaefer, he calculated his $367 annual figure by simply dividing $12 million by the number of households in Citrus Heights.
However, a report from HDL tax consultants estimated 40% of sales tax in Citrus Heights is paid for by non-residents, meaning that a significant portion of the $12 million in sales tax would be paid for by shoppers who live outside of the city but who shop in Citrus Heights. (See report)
“If assumed that 40% of the sales in Citrus Heights are from non-residents, then that means that 60% or $7.2 million of the $12 million cost is carried by residents of Citrus Heights,” the professor said in his assessment. Spreading that amount over the 34,343 households in Citrus Heights gives a household cost of about $209 annually or $17.50 per month — significantly lower than the cost presented by Schaefer, but still more than triple the $60 cost estimated by Miller.
Pitre said the problem with Miller’s $60 figure is that it only accounts for about $2 million of the tax being paid for by local households ($60 x 34,342), and doesn’t answer who would pay for the remaining amount.
Asked by email if there were other entities besides households that would be contributing to the $12 million tax revenue, Miller only responded to say that residents can run their own calculations by looking at their actual household expenditures to tally taxable purchases and then calculate what an extra 1% on those purchases would be. He said his own tally found Measure M would only cost his household of two an average of $2.91 more per month.
Guest Opinion: Measure M would only cost me $7.23/mo
Councilwoman Jeannie Bruins also said in a guest column published on The Sentinel last month that she reviewed her personal budget for 2020 and found she’d pay about $7.23 more per month. However, critics on social media noted that such averages likely don’t take into account large purchases like appliances that may only occur every five years or more.
A $2,500 refrigerator purchased at Lowe’s, for example, would cost an extra $25 with the extra 1% Measure M tax. A kitchen remodel with all new appliances could cost over $100 more in sales tax. Schaefer has noted that the extra cost could send shoppers outside the city limits to make larger purchases.
Those calculations still don’t account for where the remaining tax revenue would come from, to get to the projected $12 million more in revenue per year. City Spokeswoman Nichole Baxter said the estimated total of $12 million is a solid figure, based on the city’s actual portion of tax revenue received in prior years.
The city currently only receives 1% of the sales tax, and Measure M would double that to 2%. The statewide base sales tax rate is 7.25%, with an existing Measure A transportation tax raising the rate up another half-percent in Sacramento County, including Citrus Heights.
Baxter didn’t provide a breakdown of how the $12 million is derived, but said the city received just under $12 million in fiscal year 2018-19, from its current 1% share of the sales tax. For fiscal year 2019-20, the city saw a drop of nearly $1 million in its sales tax revenue, due to COVID-19 shutdowns.
Pitre said businesses are likely the largest other entity contributing to the sales tax, besides households and non-residents. But the actual amount of purchases made by businesses is unknown, which makes the projected impact to households difficult to account for.
“Non-residential entities could likely bear the brunt of the tax burden, especially the small business owner who makes large purchases from retail stores or discount stores like Costco,” said Pitre. “[T]he tax burden bore by small businesses could inevitably make its way back to the residential consumer by way of increased prices of goods.”
That indirect increase in costs to the consumer is also difficult to account for in determining the added household cost of Measure M. However, business purchases subject to sales tax are a factor that would lower the direct household burden of the tax paid to less than $17.50 per month.
Other factors include potential for more shoppers to be attracted to Citrus Heights, if the tax measure’s funds contributed towards a revitalized Sunrise Mall area, along with better streets, decreased homelessness and reduced crime, as advocates claim. Alternatively, the effects of COVID-19 or an economic downturn could result in less shopping and also influence the percent of non-residents shopping in the city.
HDL noted some of these unknowns in its August 2020 report, stating that its assessment of the amount of tax paid by non-residents was based on pre-COVID-19 data: “The impact of the current global pandemic has not yet been fully realized or documented in the commercial marketplace as it relates to revenue generation and the impact to resident and non-resident contributions.”
