With a massive gap between infrastructure needs and available funding, San Diego officials could consider asking the public for a sales tax increase next year, according to a report to be delivered to a City Council committee next week.
City staff has estimated that San Diego has $3.87 billion in infrastructure needs, from fixing pothole-riddled roadways to building new fire stations. However, only $2.16 billion in funding is available.
The report from the city's Independent Budget Analyst's Office, scheduled to go before the council's Infrastructure Committee Wednesday, says that three viable options for covering the $1.7 billion gap are raising sales taxes, taking out general obligation bonds and eliminating a law that requires free curbside trash pickup for residents.
A quarter-cent increase in the sales tax would raise about $68 million annually, which could be leveraged to take out a $500 million, 15-year bond that would be paid back with the resulting revenue, according to the IBA. The report said that would still leave $26 million a year with which to cash-fund projects.
The city's sales tax rate would go from the current 8 percent, tied for the lowest in the region, to 8.25 percent.
Matt Awbrey, a spokesman for Mayor Kevin Faulconer, said the mayor would prefer to fully implement reforms to make "the city as efficient and effective as possible first" before entertaining a sales tax increase.
"These reforms include letting contractors bid for city projects online, using technology to eliminate red tape and improving how projects and money are prioritized," Awbrey said.
"For example, the city has hundreds of projects on the books, but they're often not prioritized based on real-world needs, and there are tens of millions of taxpayer dollars languishing in accounts for projects that are years away from being built," he said.
The sales tax idea would face two other obstacles.
It would have to go before voters, who overwhelmingly rejected a proposed hike in an election during the last recession. Also, the San Diego Association of Governments is considering asking for a regionwide sales tax increase to fund the types of projects it handles, such as transportation.
The IBA said the city could turn to general obligation bonds, which are paid off via property taxes and can only be used to pay for new projects — not operations or maintenance. A $500 million bond would raise the property tax of a house worth $470,500 by around $64 a year, the report says.
The City Council could also repeal the People's Ordinance, which guarantees free refuse collection. Such an action would give the city $32.2 million to leverage bond sales, the IBA estimated.
