The following revenue discussion is based on the supplement and updated data from the Kelling, Northcross & Nobriga (2002) study along with data from the California State Controller’s Cities Annual Report , which compiles the revenue data from the Cities’ Financial Transactions Reports. The latter is the most accurate data you can find in a standardized format, lacking an audited report.
Prop 13 caps the property tax rate at 1 percent with annual increases based on inflation. Any additional voter-approved levy goes into a district specific account, and not to the city’s general fund. The city of San Diego gets 13 percent of the property tax collected locally, with the exception of redevelopment areas.
However, per capita collection of property taxes is above average. San Diego ranks 4th among the top 10 cities following San Francisco, Los Angeles and Oakland, who pay higher per capita property taxes than San Diego. Readers should note that this is not because tax rates are higher than other cities (these are capped statewide due to Prop 13) but because land values are high in San Diego, and there was $1.8 billion new construction (in 2003), which was second only to Los Angeles.
In an earlier editorial, Pat Shea points out that residents of the city of San Diego pay the second highest sales taxes per capita. However, the “per capita” attribution to San Diego residents is erroneous. Sales tax is proportional to sales, and no other city in San Diego County offers a lower sales tax rate than us (7.75 percent).
The city of San Diego has regional shopping destinations such as the malls in Mission Valley, UTC and Otay. These $173 million in retail sales cater to a much larger market base than the residents living in the city of San Diego, and it is actually a good thing for the residents of San Diego that folks from other cities contribute to the city’s general fund.
Transient Occupancy Taxes:
The only markets in California that San Diego (10.5 percent) competes with are Anaheim (15 percent), San Francisco (14 percent) and Los Angeles (14 percent). Other cities do not have aggressive tourism promotion.
Franchise Fee Revenues:
These are voluntary business agreements with utilities to give in many instances monopoly access to the public infrastructure, including our roads, utility poles and sidewalks. A lot of cities own their own electricity and gas utilities, so it would be meaningless to charge themselves, especially since revenues made by these utilities go back into the public infrastructure.
– Although San Diego charges 3 percent of gross sales, it does not get any sales or use tax on the sale and use of utility equipment. Other cities charge a hefty business license fee in addition to the franchise fee. The city of San Diego, as part of its lease to these utilities foregoes the ability to charge Business License Fees. Among comparable cities, the franchise revenue is comparable to population size.
- But, San Diego charges Big Business less for Business License Taxes
We surveyed the largest cities in California with a prototype business model, and asked them how much they would charge the business in terms of Business License Fees/Taxes. Our results are striking: the city of San Diego’s business license fees are significantly low in every category of business type.