To Tax Or Not To Tax -

How will local governments respond to the current fiscal crisis?

As local governments in California struggle to survive the impact of the state’s current, ongoing financial meltdown, some may be surprised to learn that their city and county bureaucracies have no intention of raising taxes to bring in much needed revenue. In fact, for many local governments, it is the last thing on their lists.

At least, that is what they say in response to questioning. According to a recent survey by the California Public Policy Institute, California Public Policy Institute  more than 85 percent of the responding cities and counties indicated that they are very or somewhat unlikely to raise taxes to address their fiscal problems. On the other hand, the same respondents indicated that they are much more likely to address shortfalls by cutting back programs, imposing hiring freezes and eliminating positions. This still poses problems for real estate professionals. For example, according to the survey, planning and zoning services will experience some of the largest cuts at the county level.

However, if the recent past is an indication, local governments and their residents will have more new taxes in their future. According to the website, California City Finance.com  November 2009 municipal elections featured 57 measures concerning taxes, fees or bonds for cities, counties, special districts and schools. That represented exactly half the total number, 114, of local ballot measures during the election cycle.

Passage rates for the 57 tax and fee measures were similar to the passage rates in previous years. Nearly two-thirds of those requiring a majority vote, municipal tax measures, passed. Slightly more than half of the special tax and bond measures requiring a two-thirds majority vote were approved. Also, two-thirds of the school parcel tax measures requiring two-thirds vote and all of the school bond measures requiring 55% voter approval were passed.

Also of note, all five municipal parcel tax measures passed, but three out of four municipal business license tax measures failed.