By Tim Schaefer–
As the election approaches and voters ponder their decision about Citrus Heights’ Measure M (the latest attempt of the city to raise the taxes on its residents), I reflect on my nearly 60 years of life, as well as my personal finances over that time.
There have been months and years of prosperity. And, there have been months and years when money has been very tight. I have been through unemployment, divorce, and even foreclosure in the mid-1990s.
So I learned that even when finances appear very bleak in the short term, it’s not forever. And, I have discovered that it’s very healthy to reexamine and realign our expenditures when our income has been reduced.
(Lots of cities and even the State of California have trimmed wages in 2020 due to the economic crisis. The state delayed a July 1st 2.5% pay increase for two years and even put furlough days into effect, thereby reducing wages by 9.23% (see source). Considering that the top four compensation packages in the city last year tallied over $1.2 million a year, a few temporary reductions would not hurt us either.)
But, back to the city, on the bright side, one day soon a vaccine for COVID-19 will be available; the economy will begin to return to pre-COVID-19 levels; and the city should see its finances stabilize with a brighter financial horizon.
For example, with the Mitchell Village model homes nearly complete, they will start selling with completion dates this coming summer. That’s 260 new homes, and this will immediately add to the city’s housing stock which turns into more property tax dollars!
If the new homes each average $400,000 in assessed value, this should bring an additional $1,250,000 per year in property taxes, with hundreds of thousands of that likely going to the city from this one development. Plus, there are many such developments that have been approved and construction is pending.
In addition, with every one of those brand-new homes comes the purchase of all kinds of customization spending, such as from furnishing the home with furniture to major appliances (like refrigerators, washers, dryers), to electronics, televisions and even automobiles. These purchases are likely to result hundreds of thousands of dollars in additional sales tax revenue.
Let’s say that Measure M passed, (which would double the city’s portion of the sales tax from one percent to two percent), and you need to purchase a $3,000 refrigerator. Would you drive to Home Depot on Madison Avenue to save $30? I probably would!
But the down side for the city isn’t that they lose $30 (that’s the city’s current rate). Since the purchase was driven outside of Citrus Heights, they don’t just lose one percent ($30), but the city loses two percent ($60). The city doesn’t get anything! And it’s better to get $30 rather than zero dollars!
The reality in economic development, is that customers vote with their feet! They go elsewhere, and in Citrus Heights are plenty of “elsewhere’s” to go just minutes away!
This is why many in the local, small business community HATE Measure M – despite what the Chamber of Commerce may say. Actually, if you lower taxes, you have a competitive advantage and you draw customers into the city. A one percent tax of a lot of purchases is much better than a two percent tax on zero purchases.
But, bureaucrats think like bureaucrats, and not like business people. Bureaucrats think, let’s just take the money from other people and spend it the way we want to spend it. And, California is at the top of list of overtaxed states now. But, they kill the “Golden Goose.”
The above is an example of how revenue would likely drop if Measure M passes. In fact, if Measure M passes, then another city or county would likely benefit from these purchases. Believe me, the cities of Folsom and Roseville (and their businesses) want us to raise our taxes!
And, don’t forget, that just months after the Mitchell Village development is complete the city’s Revenue Neutrality payments will end in fiscal year 2022-23, resulting in a net budget increase of six million dollars. That will increase the city’s current budget by around 17%. I’d say that a pretty good raise.
So as Election Day approaches, I see that we still have many challenges that face us in the next year. But Measure M is not the answer.
One of my favorite quotes is from Dr. Phil: “You don’t solve money problems with money.”
Tim Schaefer is a 30-year resident of Citrus Heights and currently serves as a member of the Citrus Heights Planning Commission. He is also a candidate running for the newly created District 3 seat on the City Council.
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