No on Measure E

Opinion from the PE May 30, 2014     http://www.pe.com/articles/city-695425-measure-percent.html

We’re always skeptical of “temporary” taxes, because often there's an attempt to make them permanent. That’s what’s happening in Banning with the local transient occupancy tax that’s placed on hotels and motels.

In 2009, voters approved Measure L, which doubled the tax to 12 percent from 6 percent of the hotel bill. Those were the darkest days of the Great Recession. At the time, the city sent out a flier explaining that the city had already trimmed the budget, eliminating 30 positions. The flier promised Measure L would only be in effect until 2014.

The city has put Measure E on the ballot for the June 3 election. It would renew the occupancy-tax increase to 12 percent, this time with no sunset, continuing a revenue stream of $330,000 a year.

Don Robinson, executive director of the Banning Chamber of Commerce, told us in 2009 the sunset measure was included in Measure L because “the hoteliers in town wanted to see if there was any adverse effect by increasing this from 6 percent to 12 percent.”

The hotel owners have seen no negative effects, he said. And by removing the sunset clause, the city won’t have to put the tax increase on the ballot every five years, he added.

But for us, if new taxes actually are needed during a crisis, they should stay temporary, able to be extended again if needed. In 2012, state voters approved Proposition 30, which increased taxes $7 billion for seven years. Gov. Jerry Brown, who sponsored Prop. 30, continues to rebuff attempts to make it permanent.

On the Banning city website, the page titled “Measure E (TOT) Information” states that the city’s general-fund revenue peaked in fiscal year 2007, then “reached its lowest point in total revenue in fiscal year 2012” — a 37 percent decline. Today, total general-fund revenue is 28 percent below 2007, the website states.

That’s apples and oranges. Fiscal year 2007 ended on June 30 that year, and included the peak of the real-estate boom. According to Zillow.com, the median price of a home in Banning was $297,000 in Jan. 2007, but crashed to $128,000 in Jan. 2012 — a 57 percent drop in five years.

But let’s compare two more normal years. In May 2004, the median price was $198,000; while in March 2014 it was $182,000. So it recovered 92 percent of its value, and likely has gone up more since.

The city’s financial statement for fiscal 2013, which ended June 30 that year, reported that general-fund revenues were $15.49 million — an increase of $1.83 million. And the city enjoyed boosts in revenues from the property tax, the sales tax and miscellaneous and intergovernmental revenues, “resulting in a combined increase of $1.93 million over the prior fiscal year.”

Despite these existing revenue increases, the city website projects that, without Measure E, the city would be forced to continue to reduce staff, with 36 personnel positions eliminated from the general fund. Already, for the 2014 budget, four police officer positions were eliminated, along with other cuts.

Like Mr. Robinson, the city points to the hoteliers backing Measure E, adding that only “transients” pay the tax. Yet hotel patrons use not only hotels, but spend money in local restaurants and stores. Continue to raise hotel taxes, and patrons will spend less in other local businesses, cutting sales tax revenues.

Our view is that the city has returned to normalcy, and the temporary tax should be allowed to expire. It should only be brought back for a vote during a future recession. 

We recommend a No vote on Measure E.