Half Moon Bay, California voters are faced with a decision on their November ballots that would raise sales taxes by an additional one percent. In total, this would make for a sales tax of 10.25%. If Measure K is passed this will earn Half Moon Bay the distinction of having the highest sales tax in the San Francisco Bay area.
The Half Moon Bay City council is presenting Measure K as an alternative to dismantling the local police department, citing a $500,000 budget shortfall for its current fiscal year. Because of this, residents and local business owners are in the position of either choosing to saddle their community with the most punitive sales tax in the area or ceding control of community policing to the San Mateo County Sheriff’s office.
A closer look at the situation surrounding Measure K reveals that the city of Half Moon Bay is facing severe budget challenges, and that the causes go even deeper than the current recession. A major challenge to Half Moon Bay’s balance sheet is the ongoing legal expenses for appealing a $37 million judgement against the city, awarded as damages to a land developer who pressed his case in Federal court (the development in question is referred to as the ‘Beachwood property’ in local parlance, and the actions of the prior city council and mayor a saga unto itself).
Ironically, the mis-steps of a previous city council in adopting an anti-development stance in the past are now part of what is forcing the current local government to propose the sales tax hike. The council states that the hike is necessary to shore up its revenue shortfalls, but the plan may bring some unintended consequences that residents and local businesses may soon regret.
Although Half Moon Bay is situated alongside California’s scenic Highway 1, some basic considerations relating to Measure K have more to do with Economics 101. While paying an extra penny for a candy bar at the Half Moon Bay Safeway may be a seen as an insignificant penalty for someone with a case of the munchies, consider the situation faced by car buyers at James Ford, Half Moon Bay’s only new car dealer. Assuming a consumer can negotiate the purchase of a 2011 Ford Mustang GT for something around MSRP, they either have to absorb the $300 penalty imposed by the proposed tax hike or negotiate a lower price with the dealer. It would be no surprise if many shoppers make the decision to take their business elsewhere, with the result that the city of Half Moon Bay will get a one percent larger share of a significantly smaller revenue pie.
Given the financial straits that the city council is negotiating, some in the local press have advocated a more aggressive effort to resolve the costly situation surrounding the Beachwood property setllement. Other proposals have included the possibility of disincorporation, and at least one outside observer has suggested that Half Moon Bay delare bankkruptcy to resolve its outsized financial obligations.
At the least, the council owes the residents of Half Moon Bay practical alternatives to the imposition of a historically burdensome sales tax. Increasing the sales tax by one percent carries a lot of baggage, and unfortunately the baggage in question will likely not be suitcases stuffed full of cash.