The City Council's Infrastructure Committee voted unanimously Wednesday to accept a report that includes a sales tax increase as an option to raise money to pay for capital projects in San Diego.
City staffers estimate 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, 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.
"(The report) is a starting point for discussion on the way that things could be structured, and the different options for the city," committee Charman Mark Kersey said. He said the funding strategies would come back before the committee later in the year.
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.
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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."
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 fund 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.
Such bonds would also require a two-thirds vote. Kersey and Councilwoman Marti Emerald said it would be critical for passage to include in a ballot measure a specific list of projects that would be funded with the money.
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.
The committee also approved a series of agreements with the San Diego Association of Governments that will pave the way for an extension of the San Diego Trolley from Old Town to University City.
The deals will allow five city-owned properties to be used in connection with the project, as stations, track maintenance access points or power stations, and for the relocation of utility equipment.
